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SNC-Lavalin scoops Atkins for $2.7bn

Canadian engineering firm to expand global offerings with takeover of UK player

Canada's SNC-Lavalin will expand its global offerings through the acquisition of UK engineering consultants WS Atkins for around C$3.6 billion ($2.7 billion) in cash.

SNC-Lavalin will pay £20.80 ($26.59) for each share of WS Atkins, which employs about 18,000 workers and booked revenues of about $2.6 billion in 2016. The price is about 35.1% higher than Atkins' March 31 closing price.

The deal is expected to close in the third quarter.

"We are very pleased to announce this proposed acquisition that is fully aligned with our growth strategy, creating a global, fully integrated professional services and project management company–including capital investment, consulting, design, engineering, construction, sustaining capital and operations and maintenance," SNC-Lavalin chief executive Neil Bruce said.

"By combining two highly complementary businesses, we will increase our depth and breadth of services to position us as a premier partner to public and private sector clients. It also creates new revenue growth opportunities in key geographies by positioning us to capitalise on increased cross-selling and the opportunity to win and deliver major projects in new regions."

SNC-Lavalin expects the transaction to deliver $89 million in cost savings by the end of the first full year after closing. The company expects to save by eliminating corporate and listing costs, optimising corporate functions and shared services, streamlining IT systems, and consolidating offices.

The deal will expand SNC-Lavalin's presence in the UK, Scandinavia, the US, the Middle East and Asia.

SNC-Lavalin plans to review Atkins for potential organisational changes ahead of integration, but it does not expect the probe to have a "material impact" on the continued employment of Atkins' workers.

SNC-Lavalin will pay for the deal through a C$1.5 billion loan from Montreal-based bank CDPQ, a C$800 million bought-deal financing, and a C$400 million private placement with CDPQ. In addition, the company will draw about C$604 million under its existing C$4.25 billion credit facility, and plans to use a new C$518 term loan to help pay for the deal.