Canadian engineering giant WSP Global Inc. WSP-T has struck a deal to buy British transport and energy consulting firm Ricardo PLC as it steams ahead with a growth strategy that shows no signs of slowing.
WSP is offering to pay 430 pence per share in a deal worth £363.1-million including debt (about $670-million at current exchange rates), the Montreal-based company said in a statement Wednesday. That’s a takeover multiple of 10.4 times earnings before interest, taxes, depreciation and amortization in 2024 for Ricardo’s continuing operations, WSP said.
Ricardo was under pressure from British consultancy Science Group, one of its major investors, to sell or break up the company after what it said was a lengthy period of underperformance. Science will sell most of its roughly 22-per-cent stake in Ricardo to WSP in a side deal, the companies said.
WSP said it has won support for the transaction from all of Ricardo’s directors as well as major shareholders representing about 48 per cent of the consulting firm’s issued share capital. It will pay for the takeover with a new £230 ($425-million) loan facility arranged by Royal Bank of Canada as well as cash on hand and existing credit.
The acquisition is only the latest in a wave of deals by WSP, as chief executive Alexandre L’Heureux reshapes what was once a boutique engineering business into a company with a global reputation and multipronged capability. Its market capitalization now stands at about $36-billion.
The industry is consolidating as projects become larger and more complex, while design companies – which include engineering and architecture outfits and planners – navigate technological change, the CEO has said. That could present more opportunities, he said.
Ricardo, which employs about 2,700 people, has been shifting its business in recent years toward a focus on environment and energy services such as air quality and water management in addition to rail and mass transit. It also has another business unit in automotive and industrial services that will likely be sold, WSP said.
“We are constructive on the proposed transaction at first blush, as it is set to accelerate WSP’s expansion in targeted high-growth areas,” Raymond James analyst Frederic Bastien said. Ricardo also comes at a reasonable price and appears to complement WSP’s existing operations, he said.
WSP, perhaps best known for its transportation projects and super-skinny skyscrapers, last year won the largest contract in its history. It will provide its expertise to Britain’s Great Grid Upgrade, the biggest overhaul of the electricity network in England and Wales in decades.