CH2M Hill will buy an Alaskan oil-services company in a deal analysts say will increase the engineering firm’s ability to compete with the behemoths that dominate the engineering industry.
The deal, announced Saturday, values Anchorage-based Veco at $463 million and is expected to be completed by the end of August.
Douglas County-based CH2M Hill specializes in construction, environmental planning and engineering and architectural design.
The Veco acquisition will boost CH2M Hill’s presence in the oil-and-gas industry, where it has never been strong, said Paul Zofnass, president of financial consulting firm EFCG, which provides business advice to the engineering industry.
“This is an area that was lacking,” Zofnass said.
Veco, which has 4,000 employees in Alaska, western Canada, the rest of the U.S., Russia and the Middle East, has been the subject of a federal anti-corruption investigation. Founder and chief executive Rick Allen and a second top executive recently pleaded guilty to bribing Alaska legislators.
The investigation also led to federal indictments against one current and two former Republican members of the Alaska House of Representatives on bribery and extortion charges.
“It was part of our due diligence to look at this issue, and we confirmed that this is an isolated instance at the very top,” CH2M Hill spokesman John Corsi said Monday.
There is a growing demand for comprehensive services on large, complex projects around the world. To compete for that work, engineering firms have to offer diverse services, Zofnass said.
CH2M Hill’s share of construction work on global projects has been growing but remains small when compared with such companies as San Francisco-based Bechtel Corp., which had revenues of $20.5 billion in 2006.
Fluor Corp., another company that frequently competes with CH2M Hill, had $14 billion in revenue, while CH2M Hill had revenues of $4.5 billion in the same period.
Over the past several years, the engineering industry has seen a spate of consolidation as companies seek to land ever larger and more comprehensive contracts.
In May, engineering and construction company URS Corp. announced it would buy another big engineering company, Washington Group International Inc., for $2.6 billion.
The companies’ combined 2006 revenues would have been $7.6 billion, the fourth-highest among U.S. publicly traded engineering and construction companies.
In a note to investors, Wachovia Securities analyst Brad Handler suggested the URS-Washington Group merger could lead to further consolidation in the energy and construction sector.
The Associated Press contributed to this report.
Staff writer Tom McGhee can be reached at 303-954-1671 or tmcghee@denverpost.com.
