Jacobs is spinning off and merging its Critical Mission Solutions and Cyber & Intelligence government services businesses with Amentum, creating a new, publicly traded company in the GovCon market.
The decision to separate Jacobs’ CMS business was first revealed in May, with the goal of establishing two distinct companies. The merger with Amentum is anticipated to be completed in the second half of the 2024 fiscal year.
Once the deal is finalized, Jacobs Executive Chair Steve Demetriou will take on the role of executive chair in the new merged company. John Heller, Amentum’s current CEO, will become the CEO of the merged entity and join its board. Additionally, Steve Arnette, currently the executive vice president and president of CMS, will be appointed as the chief operating officer.
“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,” Heller said.
“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.”
The merger creates a government technology solutions business with about $13 billion in annual revenue, consisting of Jacobs’ Critical Mission Solutions, the Cyber & Intelligence portions of its Divergent Solutions business and Amentum.
“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.
Jacobs’ Cyber & Intelligence Solutions generated $807 million in revenue in fiscal year 2023.
“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,” Pragada said. “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.”
Under the terms of the transaction, the board of directors for the new company formed from the merger will initially consist of an equal number of directors appointed by both Jacobs and Amentum. Additionally, the senior management team of this combined entity will include members from both companies. The specific individuals filling these roles will be announced at a future date.
“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 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 combined company expects to have over 80% of revenue from prime contracts serving the full program life cycle for government clients, and a talent base of over 53,000 employees. The companies both share common values and a focus on safety, inclusion and diversity, according to the press release.
“If you look at our success as Amentum thus far, it’s been a track record of adding capabilities and it is enabled us to compete in large-scale enterprise opportunities that we could not complete as individual enterprise companies,” Heller said Nov. 21 in a press call about the transaction. “That combined capability is enabling us to add to our portfolio in our pipeline of multi-billion dollar enterprise contracts where you have to have that expanded integration capability, cyber capability to compete in those opportunities.”
In the past year, Amentum doubled its bidding capacity and nearly doubled its awarded contracts in fiscal year 2023. According to Heller, this growth is directly because of increased ability to handle larger, enterprise-type contracts.
“I think with this opportunity, with Jacobs and Amentum coming together, we will have vastly expanded engineering, cyber, science capabilities that allows us to compete in markets around RTD&E, science, design, engineering, that we were not able to compete separate,” Heller said.
In fact, the combined company will have about $50 billion in combined backlog and is projected to have more than $1.1 billion of an adjusted EBITDA in 2024.
The deal is structured as a Reverse Morris Trust transaction, making it tax-free for Jacobs’ shareholders under U.S. federal tax laws. When the transaction is completed, Jacobs and its shareholders will own between 58.5% and 63% of the new company’s common shares. This includes a 51% stake held by Jacobs’ shareholders and 7.5% to 12% retained by Jacobs.
Centerview Partners LLC and Perella Weinberg Partners LP are the financial advisors for Jacobs, with Wachtell Lipton, Rosen & Katz as the legal advisor. Goldman Sachs & Co. LLC is advising the Jacobs board of directors. For Amentum, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are the financial advisors, and Cravath, Swaine & Moore LLP is the legal advisor.