MONTREAL - WSP Group is expanding its reach in Western Canada's oil and gas sector by announcing plans to acquire Focus Group Holding Inc. for $366 million.
The purchase of the 1,700-employee Alberta engineering and geomatics firm with $280 million of annual revenues is expected to close in about a month. It has the support of 80 per cent of Focus' shareholders.
"We truly believe that this transaction is a compelling acquisition which is good news for employees and clients and hopefully will provide our shareholders with long-term value creation," WSP CEO Pierre Shoiry said Wednesday during a conference call after markets closed.
The deal is supported by an $80-million investment in WSP divided equally between its two largest investors â€” the Caisse de depot and the Canada Pension Plan Investment Board.
The pension fund managers would each own 15.6 per cent of WSP.
"Through this investment, la Caisse is supporting a world-class player, one that is well-established in Quebec, as it implements its acquisition-based growth strategy," said Normand Provost, executive vice-president, private equity.
The Caisse invested $98.5 million in 2012 as part of the $442-million acqusition of British-based WSP by Genivar, as the Quebec company was then called.
WSP will also fund the transaction by issuing 5.3 million shares as part of a $180-million public bought deal. The company is also increasing its credit facility by $200 million to $600 million to help prepare for other acquisitions that will help it achieve its target of adding $500 million in revenues from acquisitions and having 20,000 employees before the end of 2015. With the Focus Group acquisition it will have some 16,700 employees worldwide.
The Montreal-based engineering firm (TSX:WSP) said the purchase will increase its Canadian workforce to about 6,100 employees, located in all provinces while balancing its Canadian platform and providing cross-selling opportunities.
Shoiry said WSP will benefit from Focus' deep experience in the oil and gas industry, especially in upstream, oil sands, midstream and liquefied natural gas (LNG) export infrastructure development projects.
"Through this acquisition, not only are we expecting to become a more important player in the Canadian oil and gas industry, but also to strengthen our presence in Western Canada," he said.
"For us they were a growing company with an ambitious strategy and a top tier performing firm so that's what we like," he said, pointing to 20 per cent compounded annual growth over two years.
Upon closing of the deal, Focus CEO David Ackert will head WSP Canada and become director of its global oil and gas network.
The addition of Focus is expected to increase earnings by 10 per cent, excluding any revenue or cost savings or restructuring expenses. Up to 15 per cent of WSP's total revenues would then come from the oil and gas sector.
The engineering firm also announced Wednesday that it earned $17.9 million attributable to shareholders or 34 cents per share in the fourth quarter. That compared with $23.1 million or 45 cents per share a year earlier. Net revenues increased 5.9 per cent to $436.1 million.
Excluding restructuring charges, net profit was $21.1 million or 40 cents per share, compared to 52 cents a year ago excluding one-time items such as integration costs and a tax recovery.
The backlog stood at nearly $1.5 billion, up 5.4 per cent from the prior year.
WSP Global, formerly Genivar, was expected to earn 41 cents per share in adjusted profits in the fourth quarter, according to analysts polled by Thomson Reuters. Revenues were forecast to reach $420.6 million.
For the full year, it earned $71.7 million or $1.38 per share, up from $46.3 million or $1.15 per share in 2012. Adjusted profits were $78.8 million or $1.52 per share, above the $1.43 per share forecast by analysts. Net revenues were $1.68 billion, up from $1 billion in 2012.
Chief financial officer Alexandre L'Heureux said the company is pleased with its 2013 financial performance, its first full year since Genivar and WSP merged in August 2012.
"The company hit all of the strategic milestones in terms of trading performance, organic growth, margin profile and balance sheet strength," he said, adding that all countries performed above expectations except Canada, Germany and Australia.
On the Toronto Stock Exchange, WSP shares closed down 15 cents at $34.62 on Wednesday.
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