WorleyParsons Limited (ASX: WOR) today went into trading halt ahead of pending market release of fresh capital raising’s results. The halt in WOR’s trading comes after the Joint Lead Managers UBS AG, Australia Branch and Macquarie Capital were seen in the market, raising $2.9 billion funds to support acquisition.
In an announcement to ASX, WorleyParsons unveiled its move to acquire energy, chemical and resource (ECR) division of technical services giant Jacobs Engineering Group. The enterprise value, free of cash and debt, has been fixed at A$4.6 billion.
Jacob ECR is a leading global provider of construction and technical services for petrochemical and chemical projects, maintenance, operations and modifications (MMO) services for hydrocarbons projects, including offshore and onshore production facilities and also delivers integrated projects.
In the settlement of transaction Jacobs shareholders would receive A$985 million in WorleyParsons stock at a price of A$16.92 per share. This takes Jacobs holding in WorleyParsons to 11% post transaction, subject to escrow.
What does this acquisition bring along with it?
The acquisition of complementary business enables WorleyParsons to expand its footprints in professional project and asset services across resources and energy sector globally. It wouldn’t be any surprise if this combination empowers WorleyParsons to sit on the top position in Hydrocarbons, Chemicals and Minerals & Metals services sector.
If the takeover deal goes through, the synergies of WorleyParsons and Jacob ECR is expected to deliver ~20% accretion in earnings per share on an FY18 pro-forma basis, thereby increasing to ~50% post run-rate cost synergies. This makes it to ~A$130 million run rate cost synergies per annum, expected by WorleyParsons to achieve within two years. Subsequently, implied pro forma FY18 EBITDA multiple of 11.5x is expected to reduce to 8.5x.
As per the company’s forecast the pro forma leverage could reach approximately 1.9x at completion of transaction while one off cost synergy implementation cost is estimated to be ~A$160 million.
WorleyParsons CEO Andrew Wood stated that the takeover of Jacob ECR is of key importance to our company and its stakeholders as the combination of its world-class capabilities with WorleyParsons global platform would create the leadership in company’s major sectors and would also result into greater earnings and growth.
Financial support to the acquisition:
The announcement informed that acquisition would be backed by A$2.9 billion entitlement Offer, Worley Parsons’ stock issue of A$985 million at A$16.92 per share to Jacobs, and additional A$895 million debts.
The company stated that additional debt will be funded via bridge loan while accelerated non-renounceable Entitlement Offer will be fully underwritten.
Under the Entitlement Offer, eligible shareholders can subscribe for 1 new WorleyParsons share for every 1.47 existing WorleyParsons shares at an issue price of $15.56 per new share in WOR. It represents 12.8% discount to the WOR’s last close price. The entitlement offer has received a notable support of an international engineering group Dar which commits to take up ~A$170 million of its Institutional Entitlement Offer.
At the time of writing, 22 October 2018 (1:50 PM AEST), WOR remains at trading halt. It last traded at $17.840.
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