A key milestone in SNC-Lavalin's strategy of becoming a global Tier-1
engineering and construction company
MONTREAL, June 23, 2014 /CNW Telbec/ - 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
"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."
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
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
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
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
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
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
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 &
Kentz's and SNC-Lavalin's experienced and talented management teams
bring complementary strengths and deep industry knowledge to grow the
"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
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
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 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
Note: the reference exchange rates assumed are £1:C$1.832 and
* 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
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. 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.
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.
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:
Public Relations Manager, Global Corporate Communications
SNC-Lavalin Group Inc.
514-393-8000, ext. 54772
Vice-President, Investor Relations
SNC-Lavalin Group Inc.
514-393-8000, ext. 57553