In a deal rumored for weeks, two of the largest players in the Department of Energy’s weapons complex will next year merge into a public company majority-owned by Jacobs shareholders.
Jacobs is lead partner in about $3.7 billion worth of contracts overseen by the Department of Energy’s Office of Environmental Management, according to an online contract chart. Amentum is an even bigger player, being the lead joint venture partner on more than $34 billion of contracts managed by the cleanup office, including the recently awarded Portsmouth Site business in Ohio.
Virginia-based government contractor Amentum said late Monday it reached a deal to combine with the government operations and cyber businesses of Dallas-based Jacobs Solutions and create a new $13-billion, publicly-traded company with 53,000 employees worldwide.
Throwing in the cyber business was not originally Jacobs’ plan, when it announced in May it would spin off government services. The transaction should close pending regulatory approvals in the second half of the 2024 fiscal year. That translates to after March 2024.
Jacobs and Jacobs’ shareholders will own up to 63% of the new combined company, the Dallas-based engineering, procurement and construction company said in its own press release. The new company will be 51% owned by Jacobs shareholders, with Jacobs Solutions keeping anywhere from a 7.5% to 12% interest in the combined company, according to a Jacobs slide presentation.
Amentum CEO John Heller will be CEO of the merged company. Steve Arnette, a Jacobs executive vice president who heads Critical Mission Solutions, will serve as chief operations officer. Jacobs’ current executive chair Steve Demetriou will become executive chair of the combined company, the companies said.
In a conference call with analysts on Tuesday morning, Jacobs CEO Bob Pragada said he did not expect too much antitrust scrutiny from the Federal Trade Commission, which has the authority to block what it considers monopolistic mergers.
Asked by an analyst whether he had antitrust concerts, Pragada said “considering there’s less than 3% of overlap between the two portfolios, our answer is no.”
The newly-formed company will be a “pure play government technology solutions prime” with more than 27,000 employees who hold government security clearances, Jacobs said. It will get the bulk of its revenue from government contracts.
“I look forward to being part of this journey as Amentum’s executive chair,” Steve Demetriou, Jacobs’ executive chair, said Monday on Jacobs’ analyst call.
In an afternoon conference call with reporters, Heller was not ready to say if the new public company will be called Amentum or something else, and whether it will be based out of Amentum’s current Chantilly, Va., headquarters. Those issues will be worked out in the next six-to-nine months before the merger is final, he said.
Jacobs will receive a $1 billion cash dividend at closing, plus additional value after closing, through disposition of a retained stake in the combined company. Jacobs expects the spinoff will enable it to be more focused on high-technology businesses. Excluding the businesses being separated, Jacobs generated about $10.9 billion in revenue in fiscal year 2023.
The combined company would have a $50-billion pipeline and $4.2 billion in net debt at closing, according to Jacobs.
Nuclear and environmental work for clients such as the Department of Energy, Environmental Protection Agency and the United Kingdom’s National Decommissioning Authority should account for about 30% of the merged company’s earnings before interest, taxation, depreciation and amortization. The metric essentially tracks the profitability of core operations net of outside financial obligations.
The Jacobs board has already approved the deal, according to the Amentum press release. The financial investment firms that own Amentum have also approved the deal, Jacobs executives said during their morning quarterly earnings call.
Jacobs announced the planned spinoff in May.
Jacobs, and its CH2M unit, lead environmental cleanup at DOE’s Idaho National Laboratory, the Paducah Site in Kentucky and the West Valley Demonstration Project in New York state. The company is also a junior partner on the Honeywell-led team that manages the Nevada National Security Site for DOE’s semiautonomous National Nuclear Security Administration.
Amentum is the lead partner on a number of big contracts around the DOE weapons complex, including leading remediation at the Hanford Site in Washington state and the Oak Ridge Site in Tennessee, where Jacobs is one of the minority partners.
