UPDATE: Opus stock soars
WSP Global Inc, a Canadian listed consultancy firm, has made a "very full" offer of more than 10 times 2016 earnings for Opus International Consultants, in what it calls "a very transformative acquisition for the region".
Opus shares soared 73 percent to $1.71, a three-year high after WSP offered $1.78 a share for the Wellington-based engineering and design consultant. The offer, an 87 percent premium to Opus's 99 cent closing price on Friday, comes after extended negotiations with Malaysian Stock Exchange-listed UEM Edgenta Bhd, which owns 61.2 percent of the company, and has entered a lock-up agreement to sell into the offer, subject to shareholder approval. UEM's 69 percent owner, UEM Group Bhd, has already given an irrevocable undertaking to vote in favour of the offer, WSP said in a statement.
Opus reported a loss of $29.9 million in calendar 2016, which it attributed to the impact of weak oil prices on its Australian and Canadian units, and WSP today acknowledged the target company's performance had been "negatively impacted by offshore challenges." Opus is scheduled to release its first-half results tomorrow and analysts at First NZ Capital expect them to include redundancy costs. The stock has retreated from as high as $2.34 in May 2011.
But WSP chief executive Alexandre L'Heureux says Opus "has a very strong brand in our industry" and that coincides with his company's increased focus on the Asia-Pacific region.
"The New Zealand market ticks all the boxes - strong economy, strong government, good engineering backbone," he told BusinessDesk. "What's attractive is what Opus can do for us in New Zealand and what we can do for them in other countries. We have no presence in New Zealand. This (deal) is hand in glove - a perfect fit."
So far this year WSP's acquisitions have been in Europe, the US and South America, while of eight major acquisitions in 2016, only one - Australia's AWT Consulting Engineers - was in the region.
WSP shares rose 0.5 percent to C$49.07 on the Toronto Stock Exchange and have advanced about 13 percent in the past 12 months, outpacing the TSE 300 Composite's 1.6 percent gain.
The offer values Opus at $263 million compared to WSP's market value of C$5.02 billion. L'Heureux says his company typically funds its acquisitions from existing debt facilities and the occasional rights offer.
Asked whether WSP would retain the Opus brand, L'Heureux said there hadn't been any discussion of such details yet. Opus was "headed in the right direction" but in that sector "status quo isn't an option. We're always looking at how we can improve."
He said WSP expects to reap revenue synergies out of the acquisition and the deal isn't about cost synergies. Acquisitions "are part of our DNA. We're very entrepreneurial and it is an industry that is consolidating."
Last year, Opus restructured its business last year along sector lines of buildings, water and transportation instead of country-based divisions, which it said was "essential to ensure a viable future for the business."
In response to the offer, Opus's board has named a subcommittee of independent directors who will commission an independent appraisal of the proposal. It urged shareholders to do nothing until the subcommittee reports back. However, in a sign that the proposal has been favourably received, Opus has agreed to give WSP access to "certain non-public information" to carry out due diligence.
In addition to the $1.78 a share offer, WSP says Opus can declare a fully imputed dividend of 7 cents a share, taking the total on offer to shareholders to $1.85 per share.