Canada’s WSP Global mulls US acquisitions

Bloomberg

WSP Global Inc., the Canadian engineering firm helping to oversee the development of California’s $64 billion high-speed rail line,
is looking for more US work through acquisitions.
“If we find a transaction that makes sense, we will do it,” said Chief Executive Officer Alexandre L’Heureux. He is especially interested in deals that would bulk up the firm’s US environment and water business, as well as adding capabilities in countries such as Australia and Germany, he said.
“There are many pockets where we could grow,” L’Heureux said in an interview at company headquarters in Montreal. WSP got almost a third of its C$6.4 billion ($4.8 billion) in 2016 revenue from what it calls “the Americas,” a zone that mostly reflects US work. The company owes much of its US heft to the 2014 acquisition of Parsons Brinckerhoff Group for $1.3 billion, which brought clients such as New York’s Metropolitan Transit Authority.
“They have digested Parsons Brinckerhoff, and I expect that they will be back on the acquisition trail later this year and certainly next,” said Maxim Sytchev, an analyst at National Bank Financial in Toronto. “Potentially we will see some large-scale transactions and some tuck-ins.”
Sytchev, who has an “outperform” rating on WSP, said that engineering’s fragmented nature worldwide means there’s no shortage of potential targets, though he declined to venture specific names.

BULLET TRAIN
The California line is expected to connect San Francisco and Los Angeles by 2029 with bullet trains expected to reach 200 miles per hour (322 kilometers per hour). The Parsons Brinckerhoff unit edged Bechtel Corp. for the $700 million management contract in 2015.
WSP’s other US transportation projects include the renovation of New York’s LaGuardia Airport, as well as the design of the city’s Second Avenue subway line extension and San Francisco’s Central Subway.
The US contracts have driven a rally in the firm’s shares, which had gained 23 percent in the 12 months yesterday compared with 16 percent for Canada’s benchmark index. Nine analysts have buy recommendations on the stock, with two saying hold and none saying sell.
“They’ve won a number of high-profile projects in the US, LaGuardia being one of them,” Sytchev said. Capital spending in the US is “transit heavy,” he said. “That’s what attracts investment attention right now.”
L’Heureux, 44, is working with his predecessor as CEO, Vice Chairman Pierre Shoiry, to study potential deals. To finance major transactions, the company could tap about C$750 million in credit lines and take on additional
debt, he said. WSP had net debt of C$851 million at the end of
December.
WSP will consider buying stakes in construction projects to bolster profit the way Canadian rival SNC-Lavalin Group Inc. does. SNC-Lavalin has used the strategy to help win contracts.
The idea, still “embryonic,” will be explored in the “next year or two,” L’Heureux said. L’Heureux also said he’s heartened by recent comments from US President Donald Trump indicating a willingness to invest billions of dollars in infrastructure.