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WSP buys Parsons Brinckerhoff for £820M

WSP has confirmed its plans to acquire professional services consultant Parsons Brinckerhoff from Balfour Beatty in a deal worth $1.35bn (£820M).

The deal will see WSP buy the firm for US$1.24bn (£753M) plus an additional consideration for cash retained by Parsons Brinckerhoff of up to US$110M (£67M), subject to certain closing and post-closing adjustments.

In a statement WSP said the terms of the acquisition have been approved by the boards of directors of both WSP and Balfour Beatty plc.

"Employees of both firms will benefit from the transaction, as we integrate our talents and make the most of our greater scale to continue to develop our people." Pierre Shoiry, President and Chief Executive Officer of WSP.

"The acquisition, which remains subject to certain customary closing conditions, including approval by the shareholders of Balfour Beatty plc, approval by certain lenders to Balfour Beatty and receipt of applicable antitrust approvals, is expected to be completed in the fourth quarter of 2014," it added.

The combined business will be one of the largest global pure-play professional services firms in its industry, with approximately 31,000 employees across the world with pro forma combined net revenues of £2.3bn for the twelve-month period ended June 28, 2014.

WSP estimates that £15M of cost savings can be achieved from the combined businesses with the first 24 months "without considering any restructuring, integration expenses and transaction related costs" with half of  these savings achieved in the first year.

Balfour Beatty bought Parsons Brinckerhoff in 2009 for £380M and the business has been at the centre of a serious tussle between Balfour and Carillion during the recent  failed merger talks with Carillion wanting to keep PB  and Balfour determined to sell. After the PB cash consideration, fees, transaction and other costs it has pretty much doubled its money in five years.

Balfour Beatty chairman Steve Marshall said: “The board believes that the sale price of £820 million delivers both a significant return on our original investment and a compelling level of value creation for shareholders - which remains the key focus of the Board." Up to £200M of the proceeds will be returned to Balfour Beatty shareholders.

Around £85M will go towards reducing the group's pension defecit and the remainder will be retained to ensure a strong balance sheet and provide financial flexibility.

Parsons Brinckerhoff has around 170 offices and nearly 13,500 employees on five continents. The firm operates in transportation, power, energy, community development, water, mining and environment segments.

Commenting on the deal Association for Consultancy and Engineering chief executive Nelson Ogunshakin said: "The market trend is towards consolidation and segmentation of services offerings to clients."

With reference to the rash of recent mergers and acquisitions across the sector he added: "It will not be surprising if we see more of these deals in the coming year. The new trend will allow for the greater creation and diffusion of skills and capacity to deliver throughout the industry."

From the II archives

 

Chris Cole, WSP's non-executive global chairman founded WSP 45 year ago and grew it from a Surrey based building services consultant to the multi-billion turnover global firm with 15,000 staff it is today, notably taking the firm into the merger with Canadian consultant Genivar in 2012.

 

Speaking to Infrastruture Intelligence in February as chairman of the ACE, Cole emphasised the changing landcape facing consulting and predicted the kind of consolidation we are now seeing.

“The fact is the consulting profession will change dramatically in the next 20 years – they will certainly not remain as consultancy only businesses,” he said.

  

“In a world that is increasingly engaging on a global basis, who can stay UK focused?” he asks. “What company of any scale or ambition will tell you ‘I’m not going to do anything outside the UK?’. That would be a fairly unusual strategy. Diversification provides opportunity and resilience. Everything will become more international and less parochial.”

WSP said the deal aligned with its growth strategy of:

  • capitalising on opportunities in countries where it has a strong and well-established presence, such as the UK; 
  • enhancing its position in industrialised regions where the corporation is established but does not have a significant presence, such as the US and Australia; 
  • expanding its offerings and capabilities in its core segments, such as buildings and infrastructure, to increase its expertise and offerings worldwide; and 
  • developing the energy segment, while further growing its project and programme management services offering.

"We are pleased to be joining forces with a firm of Parsons Brinckerhoff's long-standing reputation and know-how as we expect this transaction to create an industry leader, with the ability to deliver more expertise and services to our client base across the world," said Pierre Shoiry, president and chief executive officer of WSP. "We expect to successfully reach the strategic objectives we had set for 2015, by creating one of the largest global pure-play professional services firms in our industry around our four pillars, namely our employees, our clients, our operational excellence and our expertise."

He added: "We also anticipate that the employees of both firms will benefit from the transaction, as we integrate our talents and make the most of our greater scale to continue to develop our people, improve their career opportunities and advance their ability to work globally."

George J. Pierson, president and chief executive officer of Parsons Brinckerhoff commented: "This tremendously exciting transaction significantly expands opportunities for our employees and services to our clients. The compatibility of our respective cultures, each focusing on technical excellence and client service, is strengthened by the complementary technical skills we each offer. I have full confidence that by teaming with WSP, our ability to enrich our communities through projects large and small is greatly enhanced, all to the benefit of our employees, clients, and stakeholders."

The deal is “underpinned by a strong alignment of both companies' respective values and operating models” says WSP’s market statement.

It adds that the deal will help WSP to “meet most of its 2015 Global Strategic Plan objectives ahead of schedule, including objectives relating to net revenues and total number of employees. 

The firms, it says, possess complementary skills and serve complementary segments and geographies with limited overlap in operations, and are “aligned in terms of culture and corporate objectives as they are both pure-play professional services firms sharing similar values with respect to people, clients and teamwork”.

WSP says the deal aligns with its growth strategy as above but also creates a number of tther opportunities:  

 

GLOBAL AND REGIONAL OPPORTUNITIES

  • strengthen WSP's presence in industrialised regions of the world 
  • prudently increase its exposure within higher-growth emerging regions 
  • maintain a good mix of projects awarded from the public and private sectors 
  • enhance WSP's position in the global buildings segment 
  • position it as a key player in the transportation segment and 
  • strengthen its expertise in all of its other segments. 

WSP’s other expected benefits of the deal include:

Creates one of the largest global professional services firms in its industry

  • Enables WSP to become one of the largest global pure-play professional services firms in its industry, with approximately 31,000 employees across the world with pro forma combined net revenues of $3.8bn (£2.3bn) for the trailing twelve-month period ended June 28 2014 (pro forma to include the acquisition of Focus Holdings Inc. completed in April 2014).
  • Expands WSP's position in its industry, both in terms of geographic footprint and segments served, while extending WSP's client base and the development of WSP's people, expertise and capabilities.
  • Combines WSP's expertise in buildings segment with Parsons Brinckerhoff's expertise in transportation.
  • Provides employees of the combined firm with a larger platform to improve their career opportunities and advance their ability to work globally, while benefiting from global best practices and strong local knowledge.
  • Enhances the combined firm's value proposition to its clients and enables the combined firm to compete for, and execute some of, the most complex projects around the world.

Strategic cornerstone for growth, particularly in the US

  • Significantly strengthens WSP's presence in the US, where Parsons Brinckerhoff has a solid, stable business which employs approximately 5,000 employees.
  • Positions WSP as a key player in the US transportation segment.
  • Expands WSP's presence in the UK and provides the firm with a stronger presence in key growth regions such as Asia and Australia.

Opportunity to realise significant synergies

  • Estimated annual cost synergies of approximately US$25M (£15M) (without considering any restructuring, integration expenses and transaction related costs) and expects these synergies to be achieved over a 24-month period with 50% expected to be realised within the first twelve months. Anticipate integration costs (excluding any transaction and restructuring costs) required to realise such annual cost synergies will not to exceed US$25M (£15M) in the aggregate.
  • Provides an opportunity to streamline support functions both at the global and regional levels, while maximising connectivity and revenue synergies.

 

Detail of the £820M WSP/PB financing deal

The statement released by WSP sets out the financing arrangements for the deal as follows:

Financing Highlights

The acquisition and other related transaction costs are being financed through a combination of:

  • $502M bought deal public offering (the "Offering") of subscription receipts of the Corporation (the "Subscription Receipts") at a price of $35.85 per Subscription Receipt (the "Offer Price") and up to additional gross proceeds of $75 million pursuant to an Over-Allotment Option (as defined below); 
  • $400M private placement (the "Concurrent Private Placement") of subscription receipts of the Corporation (the "Placement Subscription Receipts") at a price of $35.85 per Placement Subscription Receipt to two existing shareholders, (i) Canada Pension Plan Investment Board ("CPPIB") and (ii) la Caisse de dépôt et placement du Québec ("La Caisse") and up to additional gross proceeds of $60 million pursuant to the Additional Subscription Option (as defined below); and 
  • the implementation of the New Credit Facilities (as defined below), which consist of a US$800M revolving facility, a US$400M  term facility and a $400M equity bridge facility.

"We are pleased with this acquisition, which is expected to contribute to both strategic growth and value creation for many years to come. Given the quality and the geographic diversification of cash flows generated by our joint operations, we expect our financial position to remain strong. In the quarters to come, our priority will be to focus on operational efficiencies to meet our financial targets around margins and cash management", said Alexandre L'Heureux, chief financial officer of WSP.

 

ABOUT PARSONS BRINCKERHOFF

Founded in New York City in 1885, Parsons Brinckerhoff is a premier infrastructure consultancy firm providing services in transportation, power, energy, community development, water, mining and environment segments. Parsons Brinckerhoff has a network of approximately 170 offices and nearly 13,500 employees on five continents. www.pbworld.com

ABOUT WSP

WSP provides services to transform the built environment and restore the natural environment, and its expertise ranges from environmental remediation to urban planning, from engineering iconic buildings to designing sustainable transport networks, and from developing the energy sources of the future to enabling new ways of extracting essential resources. It has approximately 17,500 employees, mainly engineers, technicians, scientists, architects, planners, surveyors, other design professionals, as well as various environmental experts, based in more than 300 offices, across 30 countries, on five continents. www.wspgroup.com