Engineering bosses to share $35m takeover windfall
SENIOR managers at CH2M, the engineer behind some of Britain’s most high profile infrastructure projects including the HS2 rail line, are poised to bag multimillion-dollar payouts in an imminent takeover by rival Jacobs Engineering.
A $1.5bn deal is expected to be announced as soon as tomorrow and is likely to prompt job cuts and generous compensation packages for its executive team.
CH2M, which is also a key contractor on the multibillion-pound refurbishment of the Palace of Westminster, is understood to be valued at between $60 and $65 per share by Jacobs.
Executives are in line for payouts because of change of control clauses in their contracts that will be triggered if Jacobs makes them redundant. Five executives including chief executive Jacqueline Hinman are in line for a combined $35m if they find themselves out of a job as a result of the deal. The change of control clause states Ms Hinman could receive $16.7m under the arrangement if she loses her position within two years of the takeover.
CH2M has about 20,000 staff, including around 2,500 in the UK. Sources within the company fear deep cuts as Us-listed Jacobs seeks cost savings. Although the engineer is privately owned by staff, CH2M’S wide shareholder base requires it to publish financial results and its share price.
When Ms Hinman took charge in 2014 the shares were above $70 but CH2M has since struggled as a series of troubled contracts have squeezed profits. According to the last update, CH2M’S shares are valued at $50.69, with the most recent results showing in the first quarter of 2017, CH2M made a profit of just $14m on $1.2bn revenues. Poor performance has also destabilised the ownership structure, which relies on new staff buying into the company from older staff who are leaving or retiring. Insiders say that younger staff are reluctant to buy in.
Jacobs has stepped in with CH2M under pressure to find a buyer following a $300m investment by the private equity firm Apollo two years ago. It took a 20pc stake in a deal that gave CH2M five years to buy back the shares or make its stock market debut to give Apollo an opportunity to cash in.
Ms Hinman’s contract also stipulates she holds shares worth five times her annual $1m salary, further boosting the windfall she will receive on completion of the deal.
Such payoffs are proving controversial with CH2M’S workforce, many of whom are likely to face redundancy as overlaps are eliminated in the combined business.