Jacobs exploring potential sale of CMS business, sources say

Breaking News 1 August

Jacobs exploring potential sale of CMS business, sources say

Jacobs Solutions [NYSE:J], a Dallas-based engineering, architecture, technology and construction consulting company, is exploring a potential sale of its Critical Mission Solutions (CMS) business, said three sources familiar with the matter. 

Jacobs is expected to collect initial bids from potential suitors soon, the three sources said. 

This news service reported in June that Jacobs could see interest in its CMS unit from potential suitors after announcing a plan to separate the business from the company in early May.

One potential suitor for the CMS segment is government services company Amentum, which is backed by Lindsay Goldberg and American Securities, the three sources suggested. 

Amentum was previously reported to make sense as a potential suitor. Amentum has been identified as a potential bidder in numerous sale processes involving government services businesses, in past reports by this news service.

The CMS business generated around USD 4.4bn in revenue in fiscal year 2022, according to a press release. The business is a provider of technical consulting, applied science research, training, intelligent asset management and program management services to federal government agencies. 

Centerview Partners and Perella Weinberg Partners are serving as financial advisors to Jacobs, according to the press release. 

The separation plan announcement provided a window of opportunity for any potential suitors to come in and make offers for the unit, as reported.  

The structure of the deal could reflect a Reverse Morris Trust (RMT) scenario, which would help in it becoming a tax-free transaction for Jacobs, as reported. 

On Jacobs' 2Q23 earnings call in May, an analyst brought up the decision to spin off CMS rather than sell it outright. In response to an analyst question on the tax basis of CMS, Jacobs CFO Kevin Berryman said the company evaluated all the opportunities. If Jacobs did another type of other transaction, there would be some tax implications that would occur, he said. 

In the press release, Jacobs said it is targeting completing the separation in the second half of fiscal year 2024 through a distribution that is intended to be tax-free to Jacobs shareholders. In its latest 10-Q, the company also said, "There can be no assurances with respect to the timing or form of a separation transaction and completion remains subject to final approval by Jacobs’ Board of Directors and other customary conditions." 

Jacobs has a USD 16bn market capitalization. A company spokesperson said, "We prefer not to comment on speculation."

Centerview Partners and American Securities declined to comment. Amentum, Perella Weinberg and Lindsay Goldberg did not return requests for comment.

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