Jacobs, Amentum Combine to Create New Gov’t-Focused TSP

Jacobs will combine its Critical Mission Solutions (CMS) and Cyber & Intelligence government services businesses with Amentum, a leading global engineering and technology solutions provider, to create a new, publicly traded government services firm, according to a statement from the companies.

The spin-off company will have approximately $13 billion in annual revenue and will consist of Jacobs' Critical Mission Solutions, the Cyber & Intelligence portions of its Divergent Solutions (DVS) business, and Amentum, according to the statement. Jacobs will keep its next-generation data solutions and digital technologies business, which is part of its DVS segment and core to delivering digitally enabled critical infrastructure solutions to clients, the company said.

After the spin off, Jacobs will focus on critical infrastructure and sustainability solutions for leading positions in the water and environment, energy transition, transportation and advanced manufacturing sectors. Excluding the businesses being separated, Jacobs generated approximately $10.9 billion in revenue in fiscal year 2023, the company said.

Amentum is an American government and commercial services contractor based in Germantown, Maryland. The company was formed in 2020 from the spinout of AECOM's Management Services / federal group.

Governance and Management

Upon completion of the deal, Jacobs Executive Chair Steve Demetriou will become Executive Chair of the combined company. John Heller, current CEO of Amentum, will serve as CEO of the combined company and sit on the combined company's board, and Dr. Steve Arnette, EVP and President of CMS will serve as the COO.

"Over the last eight years, our focus has been to drive a cultural and business transformation to position Jacobs as a technology-enabled solutions provider and one of the world's most innovative companies," said Steve Demetriou. "I look forward to working alongside John, Steve and the board to help bring that same dedicated focus to successfully launch this new public company and deliver significant value-added opportunities for clients, shareholders and employees."

The board of directors of the combined company will initially be composed of an equal number of directors appointed by Jacobs and Amentum. Members of the combined company's senior management team will be drawn from both companies and will be announced at a later date as integration planning progresses.

"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 mega trends," said Jacobs CEO Bob Pragada. "We believe this transaction is in the best interests of the company and our stakeholders, gaining the benefits of a tax efficient transaction, plus even greater value with significant cash proceeds and future realization of synergies. I am confident the CMS and Cyber & Intelligence Solutions teams are poised for continued success in their new chapter as part of a more focused, independent public company that will be a leading player in the critical mission government services space – with both breadth and depth of capabilities across a more diversified portfolio."

"Uniting our great organizations – Amentum, CMS, and Cyber & Intelligence Solutions – creates a leading provider of systems integration and technology solutions with the talent, scope, scale and footprint to deliver excellence and a wider range of solutions for our clients," commented Amentum CEO John Heller. "Our combined company will deliver extensive expertise in the government's highest priority areas of energy, space exploration, intelligence and analytics, and digital modernization. We look forward to the union of our strong teams and a bright future ahead."

Transaction Details

The transaction is being structured as a Reverse Morris Trust transaction intended to be tax-free to Jacobs' shareholders for U.S. federal tax purposes, according to the statement. Key details of the transaction include:

Ownership: Jacobs and its shareholders will own 58.5%-63% of the combined company's common shares upon consummation of the transaction, consisting of 51% Jacobs' shareholders ownership and Jacobs retaining 7.5-12%. The exact amount of the retained stake will be determined based on achievement of certain fiscal year 2024 operating profit targets. Funds managed by American Securities and Lindsay Goldberg, the current owners of Amentum, will own no less than 37% of the combined company's common shares upon consummation of the transaction.

Cash proceeds: Jacobs is expected to receive cash proceeds of $1 billion at close, subject to customary adjustments. Jacobs is committed to maintaining its investment grade credit profile following the separation and expects to use the cash received at close to repay debt. Jacobs also expects to realize additional value after closing through the disposition of its retained equity stake in the combined company within 12 months.

Closing: Closing of the transaction will be subject to various customary closing conditions including regulatory approvals, receipt of a private letter ruling from the Internal Revenue Service, opinions from tax advisors and the effectiveness of a registration statement with the U.S. Securities and Exchange Commission. Amentum has received all the necessary shareholder approvals to complete the transaction; no vote of Jacobs' shareholders is required for the transaction.

Timing: The transaction is expected to close in the second half of fiscal year 2024, a time frame consistent with the previously announced spin-off.