By Jamie Barrie A s the oil and gas industry continues to stall big players are protecting themselves by diversify- ing their business operations. One of those is the SNC-Lavalin Group Inc. They are holding talks to expand their global reach by trying to pull off a record deal and buy WS Atkins Plc of the UK. The cost to Canada’s biggest engineering and construction firm looks like it could be more than $2.6 billion. Atkins recently saw stocks surge as SNC made a tentative offer on the company. Officials at Atkins confirmed the bid was “a level that the board would be prepared to recom- mend.” SNC confirmed that the bid had taken place and is swinging for the fences with this deal as they hope it will be a home run for their first acquisition attempt since a self-im- posed hiatus in 2015. At the time the company wanted more consistent financial results before adding more risk.
move “would significantly diversify SNC’s service portfolio away from oil and gas, a positive in our view.” Atkins stock settled back to a 27% gain after news broke their biggest jump in well over a decade. However, SNC did not see much of a change on the TSX for their shares. If the deal succeeds Caisse de Depot et Placement du Quebec will be the big player. It is expected that this large pension fund will throw in as much as $1.9 billion. The Caisse is already SNC’s biggest sharehold- er. SNC would look to a mix of debt and equity to try and raise the remaining financing required. Having the support of Caisee adds credibility to the deal for inves- tors who may be unsure of SNC’s ability to manage such a large equity deal. Poirier said.
“As a result, we are now slightly more confident with regard to the likelihood of a transaction versus our initial take.”
This move would strengthen the company as Europe has been a target of SNC for some time.
British business has been a target since the pound fell 13% against the U.S. dollar recently. British Company’s were acquired in deals totaling more than $93 billion which is up by over 30% from last year. It is not sure how this deal will affect this trend. SNC made nearly half their revenue from the oil and gas sector last year. Atkins accumulated over half their revenue in Europe which is the type of diversification SNC needs.
As oil remains stagnant at 45 to 50 dollars a barrel acquir- ing Atkins would help the Montreal based giant diver- sify its portfolio at an opportunistic time in the market. In an attempt to explain the deal to the markets Benoit Poirier, an analyst at Desjardins Capital Markets, said the
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SPOTLIGHT ON BUSINESS MAGAZINE • APRIL 2017
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