WOR Worley Limited

   By Rhiannon Hoyle 
 

SYDNEY--Jacobs Engineering Group Inc. (JEC) will sell its energy, chemicals and resources business to WorleyParsons Ltd. (WOR.AU) via a US$3.3 billion deal that will enable Jacobs to focus on more-profitable divisions while also handing it a chunk of the Australian engineering company.

Jacobs has been narrowing its focus on lucrative infrastructure and government-services and the deal to offload its resources division--for US$2.6 billion in cash and US$700 million in WorleyParsons shares--will help it better invest in those higher-growth, higher-margin businesses, it said.

"This transaction marks an inflection point in our portfolio transformation focused on more consistent, higher-margin growth," said Jacobs Chairman and CEO Steve Demetriou.

Under the deal, which is expected to close in the first half of 2019, Jacobs will also take a roughly 11% stake in WorleyParsons. That means the Dallas-based company should continue to benefit from a nascent oil-and-gas market recovery, it said.

Resources and energy companies have been gradually spending more on drilling to firm up their production pipeline after several years of lackluster investment. "This is reflected in the recent level of contract awards and our growing backlog," said WorleyParsons.

WorleyParsons in August recorded an 86% rise in fiscal-year profit and forecast improved earnings in the current year, underpinned by rising spending by resources customers. It said the purchase of Jacob's resources arm will give it greater exposure to "more-stable" revenues from commodity producers and help it further reduce costs.

"The transaction will bring complementary capabilities in key business lines" and give WorleyParsons "greater earnings diversification and resilience," said Andrew Wood, Chief Executive of the Sydney-based company.

Jacobs plans to initially use cash from the sale to pay down debt, but said it will give the company more flexibility to review new opportunities including acquisitions.

"Our strong financial flexibility and free cash flow will support incremental profitable growth investments and capital returns to shareholders," said Chief Financial Officer Kevin Berryman.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

October 21, 2018 21:36 ET (01:36 GMT)

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