WSP Global Expands Again, with Planned Design Firm Buy in Canada
Less than a year after its transformative acquisition of U.S.-based giant Parsons Brinckerhoff for $1.35 billion, Canada's WSP Global is set to expand domestically with an Aug. 25 announced plan to purchase privately-held Ontario engineer MMM Group Ltd. for about $320.5 million.
The deal would give Montreal-based WSP a larger presence in the Toronto area where infrastructure work is expanding, it says, and add 2,000 employees to create a 34,000-person global firm. That includes 8,500 employees in Canada, with expected in-country revenue of about $1 billion even as the firm weathers a falloff in its western oil-and-gas and telematics unit, Focus Group, which also was acquired in 2014.
WSP says MMM Group is one of Canada's largest privately held designers. It ranks at No. 106 on ENR's list of the Top Global Design Firms, with $285.6 million in reported 2014 revenue, all but about $8 million in Canada. Just over half is in transportation, with about 16% in the building sector.
"We anticipate continued consolidation in our industry," said WSP Global CEO Pierre Shoiry in announcing the purchase.
Under the deal, set to close in the third quarter, Hugo Blasutta, CEO of MMM, would join WSP/Parsons Brinckerhoff, says WSP Global, but it did not disclose his executive role. David Ackert continues as President and CEO of WSP Canada Inc. The proposed buy is being funded by a public offering and by private placement by two key WSP Global investors.
In announcing results last month, WSP Global met or exceeded Wall St. estimates, reporting $827 million in revenue for its second quarter and net earnings of $79.7 million.
"Organic growth was quite strong despite the Canadian drag" largely tied to Focus Group, said Maxim Sytchev, a Toronto-based engineering and construction research analyst for Dundee Securities, in an Aug. 5 note. But he said only about 10% of WSP revenue is in oil-and-gas and mining sectors.
"WSP valuation is not cheap," said Sytchev, but he noted that buildings, transportation and environment "are the areas where there is growth globally." These make up about 79% of the firm's revenue stream.
The firm told investors it expects 2015 total revenue of between $3.08 billion and $3.46 billion.
"Management remains on track to deliver $25 million of cost synergies related to the Parsons Brinckerhoff acquisition for 2016," said Yuri Lynk, Montreal-based E&C sector analyst for Canaccord Genuuity, also in an Aug. 5 note.
