SNC-Lavalin, the Canadian engineering and construction group, is in talks to acquire UK design consultancy WS Atkins for £2.08bn in the latest bid by an overseas company to take advantage of the weakness in sterling by pouncing on a British asset.
Atkins’ board confirmed on Monday that it had received an all-cash takeover bid worth £20.80 from SNC-Lavalin and indicated that it would be prepared to recommend the offer, subject to agreement on other terms and conditions.
The FTSE 250 company’s share price had soared throughout morning trading in London as rumours of a bid for the company circulated among traders, prompting its statement. Shares closed at £19.50, up 26 per cent, giving the company a market capitalisation of £1.95bn.
A takeover would represent a step towards consolidation in the global engineering consultancy sector. Atkins serves private and public sector clients developing infrastructure projects, and its high profile projects include the redesign of London’s Trafalgar Square as well as the Dubai Opera.
Founded in 1938, Atkins generates more than half of its revenues in the UK and Europe. For its part, SNC-Lavalin has a market cap of nearly C$8bn and more than half of its $10bn in annual revenues come from Canada and the US.
Atkins said talks with SNC-Lavalin were conditional on matters including financing and due diligence. “There can be no certainty that a firm offer will be made, nor as to the terms on which any firm offer might be made,” it said.
SNC-Lavalin’s offer represented a 35 per cent premium to Atkins’ undisturbed closing price last week.
“Atkins has always been regarded as being very well-balanced, well-managed and a fundamentally high-quality business,” said Michael Donnelly, analyst at brokerage Panmure Gordon. But he added that its stock price had lagged behind since early 2016, partly as a reflection of the difficulties faced by its Middle East and energy divisions.
A deal would be the latest in the UK market by SNC-Lavalin, which struck a £1.16bn deal for Kentz Corporation, the oil and gas services specialist, in 2014.
A media report in January suggested that US peer CH2M had approached Atkins about a possible merger. Both companies declined to comment at the time.
Until recently, speculation had swirled that SNC-Lavalin would launch a counterbid for Amec Foster Wheeler, which last month agreed to be acquired by Scotland’s John Wood Group. The Canadian company has until May 1 to announce a firm intention to make an offer for Atkins. Analysts at Citi noted that its “large” pension liability could deter would-be acquirers.
SNC-Lavalin could not immediately be reached for comment.