Jacobs picks up Stone & Webster after losses lead to bankruptcy

Jacobs Engineering has stepped in to buy Stone & Webster after a series of contract overruns forced the troubled contractor to declare itself bankrupt. Jacobs will pay $150million for S&W, as well as taking on all its debt.

In taking on S&W, Jacobs inherits a slate of projects including the construction of two ethylene plants in China and one in Canada; a polyethylene/butene-1 plant in Nigeria; a polystyrene plant in Taiwan; a fluorinated polymers plant in the US; and Shell's proposed cracker in China. Clients include Kobe Steel, Nova and Solvay.

The company's troubles began last year, when contract overruns forced it to admit liquidity problems. The final straw came with delays to a gas-fired power station in Rhode Island, which forced it to take a $27.5million charge. And heaping more troubles on top, the US District Court of Massachusetts is currently hearing charges that the company made `false and misleading statements' to show stronger results for the year to 28 April.

S&W's decision to file for bankruptcy under Chapter 11 of the US bankruptcy code allows it to continue operations. The deal with Jacobs includes $50million in working capital to keep the company afloat until the acquisition is complete. `We fully intend to fulfill all of our commitments on current and future projects and keep all of our global operations open,' promises H Kerner Smith, S&W's chairman, president and chief executive.

Notwithstanding S&W's troubles, the combination of the two companies creates a new major player in the process contracting market. Smith comments that the new firm `will be one of the largest organisations in the industry, providing engineering, operating plant and construction services spanning a number of key end markets, including chemical, process and hydrocarbon, power, pharmaceutical and biotech, industrial and manufacturing, buildings, environmental programmes and infrastructure.'

And as for the future, Jacobs' president and chief executive, Noel Watson, makes his position explicit: `We will be a formidable global competitor in the rapidly consolidating engineering and construction industry.'

Copyright: Centaur Communications Ltd. and licensors