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WorleyParsons completes $4.55 billion Jacobs ECR acquisition: Is it time to invest?

The WorleyParsons Limited (ASX: WOR) share price will be on watch on Monday after the engineering giant announced the completion of a major acquisition.

According to the release, on Friday WorleyParsons completed the US$3.2 billion (A$4.55 billion) acquisition of Jacobs Engineering Group Inc.’s Energy, Chemicals and Resources division.

Management believes the acquisition has created a pre-eminent global provider of professional project and asset services in energy, chemicals and resources, employing 57,600 people across 51 countries.

The company’s CEO, Andrew Wood, said: “This merger is about more than capacity and capability. It’s about opportunity. The opportunity to become the partner of choice for our customers, the employer of choice for our people and to deliver enhanced returns for our shareholders.”

He also advised that the transition process for combining the businesses into a cohesive, merged new company is now underway following a period of extensive planning.

Cost synergies of approximately A$130 million at a cost of A$160 million are anticipated to be delivered within two years, with further benefits expected to be achieved from optimisation and revenue synergies.

Should you invest?

I think this was a great acquisition by management and believe the benefits have not yet been reflected in the company’s share price.

This could make it worth considering if you’re looking for exposure to this side of the share market.

One broker that certainly sees a lot of upside for its shares is Macquarie. Its analysts slapped an outperform rating and $21.15 price target on the company’s shares in February. This price target implies potential upside of almost 46% for its shares over the next 12 months.

Elsewhere in the industry, Macquarie’s analysts are neutral on Monadelphous Group Limited (ASX: MND) and have an outperform rating and $8.53 price target on Downer EDI Limited (ASX: DOW) shares.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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