(Recasts throughout with comments from SNC CEO, CPPIB
executive, details on stake in Highway 407, LNG positioning and
By Euan Rocha and Susan Taylor
TORONTO, June 23 Canada's SNC-Lavalin Group Inc
will buy resource-sector engineering group Kentz Corp
in a 1.16 billion pound ($2 billion) deal that SNC said
on Monday will accelerate its turnaround plan, including the
sale of noncore assets.
SNC, Canada's biggest engineering and construction company,
said the acquisition of the British company will help stabilize
its business and expand its high-growth and high-margin
operations in the oil and gas industry.
It said the takeover, which the boards of both companies
have approved, will add to its earnings within the first full
financial year after closing, and will boost its order backlog
by C$4.9 billion ($4.5 billion) to about C$13 billion.
Montreal-based SNC's headcount will increase by about 14,500
to a total of 44,500 employees under the deal, with 18,500 in
the oil and gas sector. That will allow it to undertake larger,
more complex projects and boost its presence in higher-growth
regions such as the Middle East, North America and Asia Pacific,
the company said.
Since becoming SNC's chief executive in 2012, Robert Card
has sought to stabilize the company, which was rocked by a
far-reaching misconduct scandal earlier that year that was rife
with allegations of bribery and fraud.
In an interview with Reuters on Monday, Card said SNC is
keen on the oil and gas sector, and may do smaller bolt-on deals
that fill specific technical or geographic niches. "We have some
building blocks in mind," he said.
Citing increased confidence, SNC said it now expects to sell
its 16.8 stake in Toronto's 407 toll highway earlier than it had
expected. It had indicated it was looking at a sale within a
one- to three-year period.
Canada Pension Plan Investment Board (CPPIB), which manages
the national pension fund and owns a 40 percent stake in Highway
407, said it is keen on any transaction involving the asset.
"It has performed really well since we acquired a stake in
it. There are all sorts of rights (of first refusal) among the
shareholders, and if an additional piece comes up for sale, we
will certainly look at it," CPPIB's head of Private Investments,
André Bourbonnais, told Reuters.
Since Kentz went public in 2008, it has grown rapidly with
mining, oil and gas, and infrastructure projects around the
It came close to being sold last year, but bids from both
Germany's M+W Group and British rival Amec were
rejected as too low.
SNC will offer each Kentz shareholder 935 pence per share, a
33 percent premium to the stock's Friday close on the London
Stock Exchange. Kentz shares were up 32 percent
at 928 pence on Monday, while SNC shares were 1.5 percent higher
Neil Bruce, who left his post as Amec chief operating
officer last year to head SNC's resources group, said the deal
strengthens SNC's position in attractive areas such as shale gas
and oil sands. He said the company is also well-placed for an
expected liquefied natural gas (LNG) boom in Western Canada.
"We've just ticked another box, in terms of our oil and gas
piece within LNG, that makes us a formidable contractor," he
SNC calls 2014 a year of rebuilding and consolidation, and
says that its strategy includes acquisitions that add services,
blue chip customers, or expand its geographic reach.
Card said SNC is also interested in the environment and
water, power and transportation sectors, and is eyeing services
businesses in the mining sector while valuations remain low.
($1=0.5876 British pounds)
(Additional reporting by Susan Taylor in Toronto and Karen
Rebelo in Bangalore; Editing by Jeffrey Hodgson, Saumyadeb
Chakrabarty, Lisa Von Ahn and Peter Galloway)