*Update September 24, 2024 - Jacobs and Amentum ex-distribution and when-issued market begins trading today, as symbols 'J WI' and 'AMTM WI' respectively. The regular-way trading (spin-off effective, AMTM opens for trading) is expected on Monday, September 30th, 2024.
In a significant development within the government services sector, Jacobs Solutions Inc. has finalized its plan to spin off a portion of its Critical Mission Solutions (CMS) and Divergent Solutions (DVS) businesses. The newly formed company, referred to as SpinCo, will merge with Amentum, a leading global engineering and technology firm. As this spin-off and merger unfolds, shareholders, investors, and industry professionals are asking: what does this mean for the future?
What is the Jacobs-Amentum Spin-Off?
Jacobs announced its decision to spin off a large portion of its Critical Mission Solutions business in November 2023. This spin-off includes not just CMS, but also portions of its Divergent Solutions business, specifically the Cyber & Intelligence (C&I) unit. The goal? To create a new entity (SpinCo) and combine it with Amentum, forming what’s expected to be a powerhouse in government services.
Upon completion of the spin-off, Jacobs shareholders will receive at least 80.1% of the new company, SpinCo, which will hold both the CMS and C&I businesses. Amentum will merge with SpinCo, and together, the combined entity (referred to as Combined Co) will become a publicly traded company. Jacobs’ shareholders will hold between 51% and 55% of the combined company, depending on specific fiscal performance criteria in 2024.
What Does This Mean for Jacobs Shareholders?
For shareholders of Jacobs Solutions Inc., this spin-off presents exciting opportunities. Here are some key points:
Distribution of SpinCo Shares Each shareholder of Jacobs, as of the close of business on September 23, 2024, will receive one share of AMTM stock for every Jacobs share they own. This is a tax-free distribution, meaning shareholders won’t incur tax liabilities for receiving these shares.
Ownership Stakes Post-spin-off, Jacobs shareholders will own a substantial share of the newly merged company, Combined Co. Depending on SpinCo’s fiscal performance, they will own anywhere between 51% and 55% of the combined entity. This provides existing shareholders with a diversified stake in two separate companies: Jacobs and SpinCo, which is set to be listed on the New York Stock Exchange under the ticker symbol “AMTM.”
Strategic Flexibility With two independent entities, Jacobs and Combined Co can now focus on their core businesses. Jacobs will be able to sharpen its focus on its remaining portfolio, while Combined Co, through its synergy with Amentum, is positioned as a pure-play government services provider. This strategic flexibility enables both companies to better respond to market changes.
Why is the Spin-Off and Merger Significant?
The merger of SpinCo and Amentum creates a large, diversified entity serving U.S. government clients across various sectors, from defense to energy. Here’s how the spin-off strategically benefits both companies:
Leading Government Services Provider Combined Co will become a pure-play government services provider, one of the largest in the U.S., with significant contracts from agencies like the Department of Energy (DOE), NASA, and the Department of Homeland Security (DHS). This gives the new entity a robust and stable contract base, allowing it to pursue future growth opportunities.
Diversification and Risk Mitigation With a diversified customer base and contract portfolio across military, intelligence, and civilian sectors, Combined Co reduces its reliance on any single client. This balanced business mix helps to de-risk the company’s operations while expanding its market reach.
Operational Synergies The combination of SpinCo and Amentum is expected to bring about significant cost savings, with projected synergies of $125 million to $175 million in gross savings annually within two years. These synergies will be critical to optimizing operational efficiency and competitiveness.
Enhanced Competitive Position Together, SpinCo and Amentum will boast the capabilities to win significant contracts in the future, thanks to their complementary strengths. As a top-tier government services provider, Combined Co will be better positioned to pursue large-scale contracts and projects.
Investor Benefits: What to Watch for
For investors, the spin-off represents more than just an exciting shift in the corporate structure. It creates distinct investment profiles for two separate companies: Jacobs and Combined Co. This allows investors to choose where to allocate their resources based on their goals.
Tailored Capital Structures The separate structures of Jacobs and Combined Co will give each company more control over its capital allocation. Investors will have the flexibility to invest in either the engineering and technology focus of Jacobs or the government services specialization of Combined Co.
Long-Term Growth Opportunities Combined Co is expected to thrive in the government services space, and with a solid backlog of contracts and steady demand for national security, defense, and infrastructure services, it presents strong growth potential. Meanwhile, Jacobs will continue to build on its diversified offerings, which may appeal to a different set of investors.
Tax-Free Transaction As noted earlier, the distribution of SpinCo shares is tax-free for Jacobs shareholders under U.S. federal income tax rules, making it a highly favorable transaction for those looking to maintain or grow their investment.
Key Dates for Shareholders
Record Date: September 23, 2024. This is the date by which you must hold Jacobs shares to be eligible for SpinCo shares.
Distribution Date: September 27, 2024. This is when you will receive your SpinCo shares in exchange for holding Jacobs shares. SpinCo shares will be distributed electronically in book-entry form, meaning no physical stock certificates will be issued.
Stock Listing: SpinCo will trade on the New York Stock Exchange under the symbol “AMTM” starting shortly after the distribution. (Expected on Monday, September 30th)
When-Issued / Ex-Distribution Market: Shares to begin trading on September 24, 2024 as 'J WI' and 'AMTM WI'
Final Thoughts: The Future of Jacobs and Combined Co
The Jacobs-Amentum spin-off is a transformative move that creates two focused, high-performing companies. For Jacobs, it means an increased focus on its remaining businesses. For Combined Co, it opens doors to becoming a leading government services provider, with diversified clients and new growth opportunities.
For shareholders, this spin-off provides a promising mix of stability and growth potential, with the added benefit of a tax-free share distribution. If you hold Jacobs shares, the upcoming changes could signal significant opportunities in your investment portfolio.
Stay tuned as both Jacobs and Combined Co chart new paths in their respective industries. And if you’re an investor, it’s time to watch for these exciting developments.
FAQs
Do I need to do anything to receive the spin-off shares?
No, as a Jacobs shareholder, the distribution will happen automatically, and you’ll receive one SpinCo share for every Jacobs share you hold as of the record date.
Will there be any tax implications?
The distribution of SpinCo shares is intended to be tax-free for U.S. federal income tax purposes.
How will this impact the value of my Jacobs shares?
While your Jacobs shares may adjust in value post-spin-off, you’ll hold shares in both Jacobs and SpinCo, providing you with diversified exposure to two companies.
How many shares will I receive in the Jacobs, J, spin-off?
Jacobs (NYSE:J) shareholders to receive 1 share of AMTM for each share held.
Jacobs Spin Off
Jacobs Spin Off