Jacobs Engineering acquires construction units from Aker Solutions for $676 million

Construction company Jacobs Engineering Group has purchased the process and construction unit of Norwegian engineering firm Aker Solutions ASA for US$675 million. The acquisition is expected to be finalised in the second quarter of 2011, and will see the US-based company expand its metals and mining businesses to China and Latin America.

According to reports, Jacobs expect this deal to allow them to further diversify their services and drive greater growth. Aker Solutions is Norway's flagship oilfield engineering services provider, and has set in place a plan to restructure the company after their process and construction unit is finally sold off. Aker have stated that the sale forms part of their wider strategic effort to focus on their core oil and gas business.

Analysts expect that two spin-offs will emerge, with Aker Contractors specialising in engineering, procurement and construction, and Process & Construction International, which will be a global supplier of engineering and construction services to the offshore industry. The creation of two separate companies is seen as an attempt to free up capital in order to support growth.

A recently published report, ‘Construction & Engineering - North America (NAFTA) Industry Guide', suggests that the NAFTA Construction and Engineering market reached US$759.3 billion in 2009. It also suggests that the US is the leading country in this market among the NAFTA bloc , which also includes Canada and Mexico, with a CAGR (compound annual growth rate) of 7.3% over the period of 2005-2009.

This data shows that despite the economic slowdown, the US construction market is still seeing a health CAGR, which is higher than the two other members of NAFTA. Even though Jacobs Engineering Group is looking to expand further into the Chinese and Latin American mining markets, this report shows that there is still a healthy profit to be made from the US construction.industry.

Author: Alex De Angelis, Analyst