MONTREAL, June 23, 2014 /PRNewswire/ --
A key milestone in SNC-Lavalin's strategy of becoming a
global Tier-1 engineering and construction
company
SNC-Lavalin Group Inc. (TSX: SNC) (SNC-Lavalin) is pleased to
announce that it has reached an agreement with Kentz Corporation
Limited (Kentz), approved by the boards of directors of both
companies, on the terms of a cash acquisition by which the entire
ordinary share capital of Kentz--issued and to be issued--will be
acquired by SNC-Lavalin. Kentz is a global oil & gas services
company, with 14,500 employees operating in 36 countries who
provide engineering, construction and technical support services to
clients in the oil & gas sector. The full announcement was
issued earlier publicly and may be viewed on SNC-Lavalin's
website.
The proposed acquisition of Kentz is fully aligned with
SNC-Lavalin's strategy of becoming a global Tier-1 engineering and
construction (E&C) services firm. The addition of Kentz's
capabilities will make SNC-Lavalin a leading global E&C player
in the oil & gas sector, with a greater presence in key growth
regions, including the Middle
East, North America and
Asia Pacific, with a significant
presence in Australia. The
acquisition also meets the strategic priority of balancing the
Company's risk profile by significantly raising the percentage of
revenues it derives from services. This has been supported by
discussions between both parties and a robust due diligence
process.
"We look forward to adding Kentz to our group and significantly
strengthening our capabilities in the oil & gas sector," said
Robert G. Card, President and CEO,
SNC-Lavalin Group Inc. "We are excited by the prospect of merging
the excellent capabilities of our two oil & gas teams under the
leadership of Christian Brown,
Kentz's CEO, which will create a world-class team inside of
SNC-Lavalin to better serve our combined clients worldwide. This
proposed acquisition and the agreement to sell AltaLink are
important milestones in our stated strategy for growth. Together,
they give us confidence to increase our focus on the disposition of
other mature assets. " he added.
"On behalf of our Board I am pleased to announce SNC-Lavalin's
recommended cash offer to our shareholders, which has received
unanimous support from our Board members. We feel that the Offer
recognizes the value of our future prospects, world-class client
base, and our excellent people; the ultimate assets of our
business. It also offers certainty, in cash, to Kentz Shareholders
today," said Christian Brown, CEO,
Kentz. "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. I
would like to extend my personal gratitude to all of the people
that make Kentz what it is and look forward to continuing our
success together."
TRANSACTION HIGHLIGHTS
- 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, valuing
Kentz's aggregate existing issued and to be issued ordinary share
capital at approximately £1.2 billion (C$2.1
billion). This represents a premium of 33% to the closing
price of a Kentz share on June 20,
2014, the last business day before this announcement, and a
33% premium to the volume weighted average price of a Kentz share
for the 30-day period prior to the announcement.
- The acquisition is expected to be earnings accretive in the
first full financial year after closing.
- SNC-Lavalin has an integration plan and a management team with
significant experience and expertise to deliver a highly successful
integration. The transaction is expected to deliver strong
financial benefits, including estimated annual cost synergies of
approximately C$50 million by the end
of the first full financial year after closing.
- This acquisition is expected to increase SNC-Lavalin's
headcount by about 14,500, creating a combined company of about
44,500*, with 18,500* employees dedicated to
the oil & gas sector.
- The acquisition is expected to raise SNC-Lavalin's overall
backlog by C$4.9 billion,
approximately 78% of which is expected to come from lower
risk/higher margin services-based contracts. This is expected to
bring the total backlog of the combined company to approximately
C$13 billion*.
- Kentz's Board of Directors has unanimously agreed to recommend
the transaction to Kentz's shareholders.
- The acquisition will be financed by an asset sale bridge loan
of C$2.55 billion, and a term loan of
C$200 million.
- Irrevocable undertakings have been received in support of the
transaction in all circumstances from Kentz's directors holding
Kentz shares and certain individual shareholders. Total irrevocable
undertakings received represent a total of 14.4% of Kentz's
outstanding shares.
BUSINESS RATIONALE
Consistent with the stated strategy
- The proposed acquisition of Kentz 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
& gas sector:
- 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%*.
- Transforms SNC-Lavalin's Oil & Gas business, creating a
group with 18,500* highly qualified employees worldwide
and providing important industry scale.
- 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.
- Combined company will draw from SNC-Lavalin's expertise (in
front-end design and engineering) and Kentz's expertise (in
construction management, commissioning and asset management) to
increase the breadth of services offered to clients.
- Enhances SNC-Lavalin's ability to carry out larger and more
complex oil & gas projects which meet client expectations for
schedule and budgetary performance.
- The acquisition is expected to create greater balance in
SNC-Lavalin's overall risk profile by raising the expected portion
of annual revenues the Company derives from services contracts from
34% to approximately 40%*.
Extending geographic reach and expanding in high-growth
regions
- The combined company will have a stronger North American
presence, particularly in the US.
- The acquisition is expected to materially increase
SNC-Lavalin's current annual revenues from the Middle East and Asia-Pacific, with a significant presence in
Australia.
Complementary expertise, clients and exposure to attractive
sectors
- The companies have complementary skills and services with
limited overlap, which are expected to drive future revenue
growth.
- The expanded service offering has the potential to generate
cross-selling opportunities to the combined customer base, such as
expanding the upstream and environmental service offering
internationally.
- The acquisition is expected to increase SNC-Lavalin's access to
a blue-chip client base.
- The combined company will leverage the most efficient and
effective processes, systems and policies to enhance future growth
and delivery of services to our clients.
- Kentz is a highly client-focused organization that benefits
from strong relationships, which generate a high degree of repeat
business.
- To derive the optimal value, Kentz will be fully integrated
into SNC-Lavalin by incorporating SNC-Lavalin's oil & gas
business into Kentz's operations. The combined operation will be
managed by a leadership team selected from a mix of talent from
both companies under the leadership of Christian Brown, Kentz's Chief Executive
Officer, who will in turn report to Neil
Bruce, President, Resources, Environment & Water,
SNC-Lavalin.
- Kentz's and SNC-Lavalin's experienced and talented management
teams bring complementary strengths and deep industry knowledge to
grow the business.
"We are thrilled at the prospect of joining forces with Kentz, a
company with an excellent reputation, repeat business from
satisfied clients and an extensive track record for high-quality
work," said Neil Bruce, President,
Resources Environment & Water, SNC-Lavalin Group Inc. "This
acquisition complements our existing client offering, further
broadens our geographic reach in high-growth regions, and is
expected to drive future revenue growth and cross-selling
opportunities. By increasing our mid- and upstream greenfield
capabilities in oil & gas, as well as enhancing our ability to
efficiently complete, commission and provide asset support for
projects, we will jointly be better able to help clients maintain
and enhance their facilities affordably, safely and
efficiently."
RBC Capital Markets is acting as financial adviser and corporate
broker to SNC-Lavalin. Morgan Stanley and Ondra Partners have also
provided financial advice to SNC-Lavalin. SNC-Lavalin's legal
adviser is Norton Rose Fulbright and
Stikeman Elliott acted as special board consel. SNC-Lavalin's
accountants are Deloitte LLP. Maitland acted as financial communications
consultants.
OFFER DETAILS AND TIMETABLE
The acquisition is planned to be effected by means of
Court-sanctioned scheme of arrangement in Jersey. The transaction
will be subject, inter alia, to the satisfaction or waiver of the
conditions, the approval of the scheme of arrangement by the Kentz
shareholders, the receipt of applicable regulatory approvals and
the Court's sanction of the scheme of arrangement. All relevant
documentation will be made available on SNC-Lavalin's website at
http://www.snclavalin.com.
Details of the recommended acquisition will be sent to Kentz
shareholders within 28 days of the date of this announcement. It is
anticipated that the acquisition will be completed in the third
quarter of 2014.
Note: the reference exchange rates assumed are £1:C$1.832 and US$1:C$1.077
* Pro-forma 2013 figures based on 2012A of the Valerus business
(Kentz Circular dated December 9,
2013)
CONFERENCE CALL INFORMATION
SNC-Lavalin will hold a conference call on Monday, June 23, 2014 at 8:00am EDT to discuss the proposed acquisition of
Kentz with the financial community and media. Participants will
include Robert G. Card, President
and CEO, SNC-Lavalin; Neil Bruce,
President, Resources, Environment & Water, SNC-Lavalin; and
Alain-Pierre Raynaud, Executive
Vice-President and CFO, SNC-Lavalin. To participate, please dial
toll-free at 1-866-530-1553, or 416-847-6330 in Toronto, or 514-223-0612 in Montreal, or 08002790444 in the United Kingdom. Please note that this call
will be accompanied by an online presentation that will be
available on the main page of SNC-Lavalin's website approximately
one hour prior to the call. A recording of the conference call will
also be available on our website within 24 hours following the end
of the call. Members of the media are welcome to listen-in during
the question period dedicated to financial analysts, following
which they will be invited to ask questions related to this
announcement.
ABOUT SNC-LAVALIN
SNC-Lavalin Inc. (TSX: SNC) is one of the leading engineering
and construction groups in the world, and is a major player in the
ownership of infrastructure and in the provision of operations and
maintenance services. Founded in 1911, SNC-Lavalin has offices
across Canada and in over 40 other
countries around the world, and is currently active in some 100
countries. http://www.snclavalin.com
ABOUT KENTZ CORPORATION LIMITED
Kentz is a global engineering specialist solutions provider,
which serves a blue chip client base primarily in the oil &
gas, petrochemical and mining and metals sectors. It is listed on
the London Stock Exchange (symbol: KENZ). Kentz has over 14,500
employees in 36 countries. Its three main business lines are:
Engineering and Projects, Construction, and Technical Support
Services (TSS). It has a proven track record of delivering
mechanical, electrical, controls and instrumentation engineering,
construction and management services in some of the most remote
locations on earth.
ADDITIONAL INFORMATION
This press release is not intended to form the basis of any
investment decision. It does not constitute an offer or invitation
for the sale or purchase of any securities, businesses and/or
assets or any recommendation or commitment by SNC-Lavalin or any
other person and neither this press release, nor its contents nor
any other written or oral information made available in connection
with the transaction shall form the basis of any contract.
This press release has been prepared without reference to your
particular investment objectives, financial situation, taxation
position and particular needs.
If you have any doubt regarding these matters, you should
consult your financial or other advisers.
This press release does not purport to be comprehensive or to
contain all the information that a recipient may need in order to
evaluate the transaction. No representation or warranty, express or
implied, is given and, so far as is permitted by law and no
responsibility or liability is accepted by any person, with respect
to the accuracy or completeness of the press release or its
contents or any oral or written communication in connection with
the transaction. In particular, but without limitation, no
representation or warranty is given as to the achievement or
reasonableness of, and no reliance should be placed on, any
projections, targets, estimates or forecasts contained in this
press release. By publishing this press release, SNC-Lavalin does
not undertake any obligation to provide any additional information
or to update this press release or any additional information or to
correct any inaccuracies which may become apparent.
FORWARD-LOOKING STATEMENTS
This press release contains statements that are or may be
"forward looking statements" or "forward looking information"
within the meaning of applicable securities laws. All statements
other than statements of historical facts included in this press
release may be forward looking statements. Without limitation, any
statements preceded or followed by or that include the words
"targets", "plans", "believes", "expects", "aims", "intends",
"will", "should", "could", "would", "may", "anticipates",
"estimates", "synergy", "cost-saving", "projects", "goal" or
"strategy" or, words or terms of similar substance or the negative
thereof, are forward looking statements. Forward looking statements
include statements relating to the following: (i) future capital
expenditures, expenses, revenues, earnings, economic performance,
indebtedness, financial condition, losses and future prospects; and
(ii) business and management strategies and the expansion and
growth of SNC-Lavalin or Kentz's operations and potential synergies
resulting from the transaction.
These forward looking statements are not guarantees of future
financial performance. Such forward looking statements involve
known and unknown risks and uncertainties that could significantly
affect expected results and are based on certain key assumptions.
Many factors could cause actual results to differ materially from
those projected or implied in any forward looking statements. Due
to such uncertainties and risks, readers are cautioned not to place
undue reliance on such forward looking statements, which speak only
as of the date hereof. All subsequent oral or written forward
looking statements attributable to SNC-Lavalin or any of its
directors, officers or employees or any persons acting on their
behalf are expressly qualified in their entirety by the cautionary
statement above. SNC-Lavalin disclaims any obligation to update any
forward looking or other statements contained herein, except as
required by applicable law.
For further information:
Media:
Lilly Nguyen
Public Relations Manager, Global Corporate Communications
SNC-Lavalin Group Inc.
+1-514-393-8000, ext. 54772
lilly.nguyen@snclavalin.com
Investors:
Denis Jasmin
Vice-President, Investor Relations
SNC-Lavalin Group Inc.
+1-514-393-8000, ext. 57553
denis.jasmin@snclavalin.com
SOURCE SNC-Lavalin