Post a 2-day trading halt, WorleyParsons Limited (ASX: WOR) witnessed a steep plunge in its stock price while it expressed about acquiring Jacobs’ Engineering Group’s Energy, Chemicals and Resources business (Jacobs ECR) for a consideration of about $4.6 billion.
WOR delivers projects, provides expertise in engineering, procurement and construction and offers a wide range of consulting and advisory services. The company covers the full life cycle from creating new assets to sustenance and enhancements of operating assets, in the hydrocarbons, minerals, metals, chemicals and infrastructure sectors. Companies resources and energies are focused on responding and meeting the needs of the customers over the long term and thereby creating value to the shareholders. After receiving the strong support from institutional shareholders for the institutional entitlement offer and for WorleyParsons’ acquisition of Jacobs ECR, Company has successfully completed the institutional entitlement offer of its 1 for 1.47 accelerated non- renounceable pro-rata entitlement offer announced on October 22, 2018.
The offer is undertaken to partly fund the acquisition of Jacobs Engineering Group Inc.’s Energy, Chemicals and Resources division. The full offer amount being raised is based on buying shares worth of $1.8 billion at $15.56 per share. This offer was well supported by eligible institutional shareholders resulting with a take up rate of 90%. The institutional shortfall bookbuild was oversubscribed from both existing WorleyParsons shareholders and other institutional investors. New shares issued under the institutional entitlement offer will rank equally in all respects with existing shares expected to be allotted on October-31. Commencement of trading on the Australian Securities exchange will be on a normal settlement basis on the same day.
The fully underwritten retail component of the entitlement offer (Retail entitlement offer) will raise approximately $1.1 billion. The offer will open on October-29 and close at 5:00p.m (AEDT) on Wednesday, November-7. Investment at the offer price as on the record date on October 24 can be made by the eligible retail shareholders at the offer price. The terms and conditions for the eligible retail shareholders are outlined in the Retail entitlement offer booklet which will be dispatched on October-29.
The acquisition of Jacobs ECR will certainly be a transformative step for the company, establishing it as the pre-eminent global player across the key focus sectors. Strong investor response is an enforcement for the transactions compelling strategic rationale. However, many experts have expressed discontent and have disapproved of the acquisition move. Further, WOR also intends to raise about $895 million in debt while $985 million of its shares are being said to be issued to Jacobs. Jacobs is listed on the New York Stock Exchange and the current scenario reflects that WOR is paying a huge price for the acquisition, which is not as per the market’s expectations. There have been concerns raised on future price/earnings scenario.
WOR after making the announcement traded at $15.81, which is down 11.4% as at October 24, 2018. This is a stock to be watched out for given the latest developments.