US giant Jacobs Engineering acquires Wood’s nuclear engineering business

/ September 3, 2019/ EDF, Infrastructures, Jacobs Engineering, M&A (large, with revenues above $50m), Nuclear, UK, US

Jacobs Engineering, a US infrastructure giant, is to acquire the nuclear engineering business of (another infrastructure giant in the UK) Wood. Jacobs is paying an enterprise value of USD 300m.

In the world of nuclear plant engineering, Wood’s nuclear engineering business is sizeable with USD 285m in 2019 expected revenues, an expected adjusted EBITDA margin of 10% margin and a headcount of 2,000. The unit has a background in Wood’s acquisition of Amec Foster Wheel in 2017.

It provides nuclear reactor design, operations, and improvement services, along with inspection and qualification, decommissioning, operations and other nuclear plant engineering services. Wood’s nuclear business operates mostly in the UK (90% of revenues) with EDF Energy as a client at Hinkley Point or NuGen in Sellafield. Wood is also active at ITER, in a partnership called MOMENTUm with South Korean nuclear plant technology vendor KEPCO and Assystem.

Jacobs Engineering highlighted the differentiation that Wood’s nuclear engineering business brings, with laboratories for testing activities, and also a facility conducting research around the design of generation IV reactor. Wood’s nuclear unit also has several IP, including reactor performance and analysis.

Jacobs Engineering already derives USD 1.2bn in civil engineering services to nuclear clients, mostly in the US (2/3 of revenues) and in the UK (the remaining 1/3). Jacobs hopes to accelerate its development outside of the US, to the UK initially, but also in the Middle East and in India, where major nuclear projects are taking place or about to be started.

Jacobs Engineering is not a very familiar name to the world of ER&D services. The company is a USD 11.5bn firm that is expanding outside of its core building activities toward more specialized higher-margin engineering services.

The company has made several acquisitions in its Aerospace, Technology, Environment and Nuclear business: in April 2019, Jacobs ventured in the US government services market with its acquisition of KeyW for a price of USD 815m. KeyW is an IT service vendor, with specialized intelligence, surveillance and reconnaissance capabilities.

Our read-through from this acquisition is mixed. Without doubt, the ER&D industry, with its high growth and relatively high margins, is attracting the competition. Nuclear engineering is a niche market that is somewhat adjacent to core ER&D activities. However, we do not think that US infrastructure giants are likely to make major M&As in the ER&D space, as the business models are very different.

On a different note, this is a missed opportunity for Assystem that could have doubled the size of its nuclear engineering business with the acquisition of Wood.

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