En­gi­neer­ing bosses to share $35m takeover wind­fall

The Sunday Telegraph - Money & Business - - Front page - By Alan Tovey

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.

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