Canada-based global engineer-constructor SNC-Lavalin could face pressure to sell or exit the public market, analysts say, after the Ottawa government said it would not negotiate a remediation deal with the Montreal-based company over charges of international bribery and corruption that occurred before 2012 under since-fired executives, some of whom are criminally charged. The company has also undergone a major corporate ethics revamp.

Federal prosecutors’ refusal on Oct. 10 to execute a deferred prosecution agreement under a newly enacted Canada law, for reasons not made public, comes as a month-long preliminary inquiry into the charges began on Oct. 29 in the Court of Quebec.

A federal prosecution service spokeswoman confirmed it turned down SNC-Lavalin’s request to negotiate an agreement but declined further comment, citing ongoing litigation.

Daniela Pizzuto, a spokeswoman for SNC-Lavalin, says the firm is “exploring our option to appeal this decision.”  But observers don't believe that step will be successful, according to Canada's Globe & Mail newspaper.

Judge Claude LeBlond will determine, based on evidence presented by prosecutors and by the company, whether the case should proceed to criminal trial. He has banned media coverage of proceedings.

In days since the deal rejection, SNC-Lavalin has sought to make its case also in the court of public opinion, issuing a public appeal to Canadians on its website and in media ads from CEO Neil Bruce in which he "apologized for the shortcomings that took place prior to 2012, which should have never taken place"  and noted the firm's efforts since then "to achieve excellence in governance and integrity in an effort to regain the confidence of all our stakeholders and employees"

Said Bruce: "We don’t want to be treated differently; we don’t want the past to be forgotten; we do want to move forward. We want to be given the chance to do so through
a remediation agreement."

A conviction would disallow SNC-Lavalin from bidding on government contracts for a decade, with repercussions extending to its global business.

The firm leads the consortium rushing to complete the $3.1-billion Champlain bridge in Montreal, that it announced Oct. 25 now is set to finish by mid-year 2019.

The company had hoped the remediation deal would allow it to negotiate a monetary settlement instead of going to trial. The rejection of its mediation bid pushed SNC-Lavalin’s share price down 14% on Oct. 10 to the lowest level since 2016.

The Royal Canadian Mounted Police in 2015 charged SNC-Lavalin with paying $36.5 million in alleged bribes to government officials in Libya for a decade, ending in 2011, and defrauding Libyan organizations of nearly $100 million. The firm has pleaded not guilty to fraud and corruption charges filed against the corporate entity and two subsidiaries.

Yuri Lynk, an analyst at Canaccord Genuity Corp. in Montreal, says SNC-Lavalin’s management and board should explore a “go private” transaction or sale, “given the current valuation disconnect in the market.”

The firm’s core engineering and construction business is now worth just $1.7 billion, a “tremendously low” number after it paid $2.7 billion last year for UK-based engineer WS Atkins, Canaccord Genuity estimates. 

“As a publicly listed company, we will explore all our options as we move forward following this decision,” Pizzuto said, addressing speculation that SNC-Lavalin’s stock price shock could make it a takeover target.

Since the bribe scandal broke, the firm, a major infrastructure contractor in Canada, has compensated some corruption-related costs, sued ex-employees suspected of wrongdoing to recover monies and boosted internal ethics compliance.

Some ex-executives await trial, including former CEO Pierre Duhaime. He is charged with fraud and bribery linked to a Montreal hospital project.

“We find it unfathomable that the government has elected to undertake this action,” given the firm’s compliance, process improvements and settlements with the Quebec government and shareholders, said Maxim Sytchev, industry analyst at National Bank Financial.

In a statement, SNC-Lavalin said it “strongly disagrees” with prosecutors’ position and “remains open and committed” to a pact “in the interest of” employees, retirees, clients, investors and other stakeholders, “all innocent parties.”

The firm will release third-quarter results on Nov. 1.