SNC-Lavalin's $2.78bn acquisition of Atkins creates engineering giant
The takeover of British consultancy firm Atkins allows Canadian major SNC-Lavalin create a global, fully integrated engineering giant, that would enjoy near-monopoly in projects markets within the infrastructure, transportation and energy sectors
Canadian engineering major SNC-Lavalin on Monday announced completing the acquisition of British engineering consultancy firm Atkins, for an estimated C$3.6bn or US$2.78bn.
The takeover of WS Atkins plc allows the SNC-Lavalin Group Inc create a global, fully integrated engineering giant, that would leverage its significant control of the infrastructure, transportation and energy sectors to establish a near-monopoly on the projects market in these industries, especially in the Middle East.
The combined professional services and project management company is expected to ward off competition from its rivals worldwide with its array of services – including capital investment, consulting, design, engineering, construction, sustaining capital and operations and maintenance.
“SNC-Lavalin is continuing to deliver on its strategy of establishing itself in the top 3 in our industry globally. By combining our two highly complementary businesses, we are solidifying SNC-Lavalin’s position as one of the largest fully integrated professional services firms in the world, while improving our margins and balancing our business portfolio,” Neil Bruce, president and CEO of the Montreal-based company, was quoted in a press release as saying.
The merged entity will command a global workforce of over 50,000 employees and annual revenues of approximately $9bn. In the press release received by arabianoilandgas.com, SNC-Lavalin says it believes the acquisition increases its customer base, geographic reach and scale, ‘making us a true global player with more balanced revenue coverage worldwide, while strengthening our position globally to develop and capitalise on the infrastructure, rail & transit, nuclear and renewables markets’.
It might be interesting to note that even before this mega-merger saw the light of day, SNC- Lavalin had been enjoying a commanding position in the oil and gas engineering, procurement and construction (EPC) market in the MENA region, by virtue of which it leaped from No.3 to become the numero uno in Oil & Gas Middle East’s Top 30 EPC Contractors list this year.
This key acquisition highly raises SNC-Lavalin’s business prospects, as Atkins is known to be a reputed consultancy firm, specialising in design, engineering and project management verticals. Headquartered in the UK, Atkins is a geographically-diversified global company with approximately 18,000 employees in the US, Middle East and Asia, together with a leading position in the UK and Scandinavia.
Heath Drewett, group finance director and executive director of Atkins, now becomes president of Atkins, SNC-Lavalin’s fifth business sector, and a member of SNC-Lavalin’s executive committee, reporting directly to SNC-Lavalin’s CEO Bruce.
“Joining SNC-Lavalin will provide us with the ability to offer our clients and employees the enhanced scale, capabilities, expertise and other benefits that come with being part of a larger and stronger global company,” Drewett was quoted as saying in the press release. “At the same time, we look forward to bringing our own unique project management, design, consulting and engineering capabilities to SNC-Lavalin’s clients. The result will be a more agile and responsive company that better meets client needs and creates cross-selling opportunities.”
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The acquisition is expected to improve SNC-Lavalin’s quality of earnings, adding approximately $2.7bn of consistent comparatively high-margin revenue, with ongoing revenue from framework and master service agreements, providing long-term repeat business.
‘It further reduces our business risk profile and is expected to improve overall margins, as Atkins operates a consultancy business model, adds a significant amount of reimbursable projects, and fixed-price lump sum contracts do not carry any procurement or construction risk’, the Toronto Stock Exchange-listed company says in the statement.
“We are now a true global player that is in a stronger position to offer clients complementary and a wider breadth of expertise, capabilities and services. We are thrilled to welcome the employees of Atkins and the tremendous talent they will bring to our combined company. Together, we will become part of a larger global organisation that will open the door to new opportunities for further growth and development,” Bruce said.
The aggregate cash consideration for the acquisition of £20.80 per Atkins share in cash for a total consideration of approximately $2.78bn was financed using the net proceeds from the SNC-Lavavlin’s previously announced $680mn public bought deal offering of subscription receipts completed through a syndicate of unerwriters.
Over the coming months, teams from both organisations will work together to integrate both companies in order to create value for all stakeholders and realise expected synergies from the acquisition.
SNC-Lavalin has a strong record of successful integrations, as demonstrated by its previous acquisition of Kentz in 2015, and is committed to leveraging the best practices from each organisation to ensure that the two companies are combined with speed, diligence and efficiency.
The acquisition is expected to deliver approximately $92.7mn in cost synergies – an estimated $23.2mn from SNC-Lavalin and $69.5 from Atkins – by the end of the first full financial year. These synergies would mainly include eliminating corporate and listing costs, optimising corporate and back-office functions and shared services, streamlining IT systems, and real estate consolidation where appropriate.
As previously announced by Atkins, the British firm’s shareholders voted in favour of the acquisition at a meeting convened by order of the High Court of Justice in England and Wales and a general meeting, both held on June 26th. The acquisition was structured as a scheme of arrangement and the Court sanctioned the scheme on June 29th. Following the sanction of the Court, the acquisition became effective in accordance with its terms on Monday, July 3rd.