Canadian Consulting Engineer

SNC-Lavalin makes major acquisition

June 24, 2014
By Canadian Consulting Engineer

SNC-Lavalin, Canada's largest engineering corporation, has announced it is acquiring Kentz Corporation, an international engineering company with 14,500 employees.

SNC-Lavalin, Canada’s largest engineering corporation, has announced it is acquiring Kentz Corporation, an international engineering company with 14,500 employees.

Kentz is listed on the London Stock Exchange and has employees in 36 countries. It works primarily in the oil and gas, petrochemical and mining and metals sectors. It does engineering, construction and technical support services.

The boards of directors of both companies have agreed to the transaction by which the entire ordinary share capital of Kentz — issued and to be issued — will be acquired by the Montreal-based SNC-Lavalin.

The press release said that the acquisition, which is expected to be completed in the third quarter of this year, is “consistent with SNC-Lavalin’s strategy of becoming a global Tier-1 engineering and construction (E&C) company, with a leading position in the oil and gas sector.”

The firms’ two oil & gas teams will be integrated under the leadership of Christian Brown, Kentz’s chief executive officer. Brown will in turn report to Neil Bruce, president of resources, environment and water with SNC-Lavalin.

From a business point of view, the company says the acquisition:

– significantly increases SNC-Lavalin’s exposure in the higher margin oil & gas sector, and is expected to raise the percentage of its annual revenue derived from oil & gas services from 7 to approximately 24%.

– adds upstream capabilities, Liquefied Natural Gas (LNG) expertise, as well as unconventional oil & gas capabilities to SNC-Lavalin — in the oil sands, and in the shale gas growth sector following Kentz’s acquisition of Valerus Field Solutions in January 2014.

The acquisition will create a combined company of about 44,500 employees. Of these about 18,500 will be working in the oil and gas sector. Revenues from the Middle East, Asia-Pacific and Australia are expected to rise.

Brown said in the press release: “Our track record in providing complex engineering and construction solutions to the energy sector globally, has evolved considerably from our first international projects in the 1970s, and many of the people instrumental to our growth remain with us today. We have a bright future and I believe that SNC-Lavalin’s technical abilities and scale can support our continued success and bring further benefits to our employees, clients, and partners.”

Under the terms of the acquisition, each Kentz shareholder will be entitled to receive £9.35 (C$17.13) in cash for each Kentz share.

The total backlog of the combined company is expected to be approximately $13 billion.

The acquisition will be financed by an asset sale bridge loan of $2.55 billion, and a term loan of $200 million.

To read the entire press release, click here.


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