Apollo to Buy Minority Stake in Firm; Deal Values CH2M at Roughly $2B

In mid-May, Apollo Global Management (APO) agreed to buy a minority stake in CH2M HILL Inc., a deal that values the global engineering services company at roughly $2 billion.  The New York private-equity firm will spend $300 million on a preferred equity stake in CH2M.  Apollo, which typically doesn’t make minority investments, will get two seats on CH2M’s Board of Directors as well as annual dividends in the form of additional shares as part of the deal, according to people familiar with the investment.  

“Given the enormous infrastructure needs around the globe, be it transportation, water, energy, or the environment, we see now as the time to grow,” said Gary McArthur, CH2M Chief Financial Officer.  Apollo’s investment will be used to fund the company’s growth, both organically and by acquisition, as well as to pay down debt, Mr. McArthur said.  An initial public offering of the company could occur in the next few years, Mr. McArthur said, though one isn’t currently planned.  

Apollo believes CH2M is somewhat “recession-resistant” because in a downturn government often allocates stimulus spending toward infrastructure, and corporate clients lift their spending in the wake of a recession, according to people familiar with the firm’s thinking.  Apollo also believes CH2M will benefit from increased spending on the company’s services as a result of growing populations, environmental preservation, and the replacement of aging infrastructure, the people said.  

The deal comes amid ongoing consolidation in the engineering services sector.  Last October, Aecom Technology Corp. ACM 1.07 percent acquired rival URS Corp. for about $4 billion.  

It also caps off a streak of service-related investments by Apollo, which earlier this month agreed to buy two security services companies, Protection 1 Inc. and Alarm Security Group LLC.  In February, Apollo completed the acquisition of IT services firm Presidio Holdings Inc., and in March completed the purchase of a 50 percent stake in the services arm of Australian construction company Leighton Holdings Ltd.