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    Categories: Legal News

Jacobs Announces Merger to Form Public Government Tech Company

In a strategic move, Jacobs Solutions (NYSE: J) has unveiled plans to spin off and merge its critical mission solutions (CMS) and cyber and intelligence businesses with Amentum, a significant development that will result in the establishment of a new publicly traded government technology services contractor.

The Powerhouse Combination

The transaction is set to give rise to an independent entity boasting an impressive annual revenue of approximately $13 billion. This new government technology giant will possess a stable foundation of prime government contracts, a consolidated backlog of around $50 billion, and a robust workforce exceeding 53,000 employees. Notably, this workforce will include over 27,000 cleared personnel, as highlighted in a joint release issued by the two companies on Monday.

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Leadership Reshuffle

Upon the deal’s completion, Jacobs Executive Chair Steve Demetriou will transition into the role of executive chair for the newly formed entity. Meanwhile, John Heller, Amentum’s CEO, and a seven-time Wash100 awardee, will step into the chief executive role and join the combined company’s board of directors. Steve Arnette, currently the executive vice president and president of CMS business at Jacobs and a 2023 Wash100 awardee, will assume the position of chief operating officer for the publicly traded company.

Merger Mechanism and Timeline

The merger is set to be executed through a Reverse Morris Trust transaction and is anticipated to conclude in the second half of fiscal year 2024. However, the finalization is contingent upon regulatory approvals and adherence to other customary closing conditions.

Focus and Future Prospects

“Our combined company will deliver extensive expertise in the government’s highest priority areas of energy, space exploration, intelligence and analytics, and digital modernization,” stated John Heller. The shareholders at Jacobs will retain up to 63 percent ownership in the combined entity. Additionally, the company anticipates securing $1 billion in cash proceeds and realizing net cost synergies ranging between $50 million and $70 million.

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Jacobs’ Strategic Focus Post-Merger

Jacobs will retain the data solutions and digital technologies components of its Divergent Solutions business after the merger. The company will pivot its focus toward addressing critical infrastructure and sustainability challenges in the energy transition, water and environment, transportation, and advanced manufacturing sectors.

CEO’s Perspective

Commenting on the strategic move, Jacobs CEO Bob Pragada remarked, “By separating CMS and associated Cyber & Intelligence Solutions, Jacobs will streamline our business portfolio and transform into a more focused, higher-margin company more closely aligned with key global megatrends.”

Recent Developments and Advisors

This significant merger follows recent reports that Jacobs was in advanced talks regarding the potential merger of its CMS business with Amentum. In May, Jacobs had previously announced plans to spin off its CMS business into an independent company focusing on applied science research, technical consulting, program management, training, and intelligent asset management support services for federal government customers.

Centerview Partners and Perella Weinberg Partners served as financial advisers to Jacobs, with Wachtell Lipton, Rosen & Katz acting as legal counsel. Goldman Sachs & Co. has been appointed as the financial adviser by Jacobs’ board of directors. J.P. Morgan Securities and Morgan Stanley & Co. are advising Amentum on the deal’s financial aspects, while Cravath, Swaine & Moore is serving as the legal adviser to Amentum.

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Maria Lenin Laus: