WSP Global shares surge with deal to buy Ontario's Golder Associates for $1.5 billion

MONTREAL — WSP Global Inc. has secured a transformation deal to take advantage of the world's green transition after agreeing to buy Ontario's employee-owned Golder Associates for about $1.5 billion.

"This transforms the company and puts WSP in a different stratosphere," chief executive Alexandre L'Heureux said in an interview.

"Today we become the world's most important company in environmental and earth services."  

The agreement announced Thursday positions WSP to capitalize on the rapidly growing trends in ESG (environment, society and governance) that is driving demand for environmental services and sustainable infrastructure development.

The deal comes as governments around the world consider ways to recover from the economic impact of COVID-19 and look at green initiatives like transit.

"The timing couldn't be better for WSP and a Quebec company like ours to take a global leadership in this transition," L'Heureux said.

The Montreal-based engineering services firm's shares surged nearly 14 per cent to $110.20 in early afternoon trading, down from a record high of $112.80 set in early trading on the Toronto Stock Exchange.

After the deal closes, expected in the second quarter, 14,000 of WSP's 54,000 employees will be focused on accelerating the transition to green solutions.

The acquisition achieves a key plank of its strategic plan with the environment sector accounting for about 25 per cent of WSP's total annual revenues of $8 billion and half of net revenues coming from strategic advisory services.

It also establishes relationships with investors GIC, one of the world's largest sovereign wealth funds and the British Columbia Investment Management Corp., one of Canada's largest institutional investors.

WSP will issue shares to GIC worth $260 million at a price of $92.98 each, and $50 million to BCI. The remaining $1.2 billion will be funded through debt.

Founded in 1960, Mississauga, Ont., -based Golder provides engineering services in industries such as the environment, mining, oil and gas, and energy and infrastructure. It is present in 30 countries with 7,000 employees in 155 offices.

"Combining Golder’s industry-leading expertise with WSP’s impressive world-class platform and highly complementary services will provide long-term benefits for our people and help create greater value for our clients," stated Golder CEO Hisham Mahmoud.

WSP says the transaction will immediately boost adjusted earnings and increase from there as about $35 million in cost synergies are achieved over two years. Half that amount will be realized within 12 months of closing.

Costs to realize these savings are not expected to exceed $35 million.

The transaction must be approved by not less than 75 per cent of Golder shareholders at a special meeting to be held on Jan. 13. About 99 per cent of Golder's partners, along with about 83 per cent of shares held by an employee trust, have entered into agreements to support the deal.

WSP will receive a termination fee of US$25 million should Golder support a superior proposal.

Industry analysts welcomed the acquisition of a company that has 60 years experience in the geo-sciences sector, an engineering niche focused on earth and environmental conditions.

Sabahat Khan of RBC Dominion Securities called it a "good acquisition that checks off all the boxes."

WSP's environmental sector becomes the second-largest after transportation and infrastructure at 47 per cent of revenues, and ahead of property and buildings at 21 per cent.

"We view the acquisition of Golder as a solid transaction in the right end-markets," he wrote in a report.

He said it increases WSP's exposure in Australia and New Zealand.

Mona Nazir of Laurentian Bank Securities described it as a "much-awaited acquisition" that immediately "catapults WSP to a leading position within the environmental 'green' space and increases head count by 15 per cent."

By Ross Marowits in Toronto

— With files from Julien Arsenault

This report by The Canadian Press was first published Dec. 3, 2020

Companies in this story: (TSX:WSP)

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