Big News in Engineering: WSP's Major Acquisition!

In a strategic leap forward, Canadian engineering powerhouse WSP Global Inc. has secured a deal to purchase the British transport and energy consulting firm, Ricardo PLC, for an impressive $670 million. This acquisition marks yet another milestone in WSP's ambitious growth trajectory.

WSP is set to pay 430 pence per share, valuing the total deal, including debt, at approximately £363.1 million. This calculates to a takeover multiple of 10.4 times Ricardo's expected earnings before interest, taxes, depreciation, and amortization for 2024, signaling the company's robust potential.

Behind the Deal: Ricardo's Pressures and Prospects

Ricardo has been navigating choppy waters recently. Under pressure from the consultancy Science Group—one of its major shareholders—Ricardo faced calls to either sell or restructure after a prolonged period of underachievement. In a side arrangement, Science Group plans to offload most of its roughly 22% stake to WSP.

With the backing of Ricardo’s directors and significant shareholders representing about 48% of its share capital, WSP is ready to fund this acquisition through a newly arranged £230 million loan facility with the Royal Bank of Canada, supplemented by cash reserves and existing credits.

A New Era for WSP: Expanding Horizons!

This acquisition is part of WSP's broader strategy to transform its identity from a boutique engineering firm into a globally recognized powerhouse with diverse capabilities, boasting a market capitalization of around $36 billion. As projects grow in scale and complexity, the engineering sector is witnessing a wave of consolidations, revealing new opportunities for growth.

Ricardo's New Focus: Environmental and Energy Services

With about 2,700 employees, Ricardo has been pivoting its operations towards environmental and energy services, including air quality and water management, as well as rail and mass transit solutions. However, WSP hinted that it might divest certain automotive and industrial services that Ricardo currently offers.

Analyst Frederic Bastien from Raymond James expressed optimism about the deal, noting its potential to enhance WSP's presence in high-growth areas at a reasonable price while complementing existing operations.

WSP's Track Record: A Leader in Major Projects

Known for its involvement in high-profile transportation projects and innovative skyscraper designs, WSP secured the largest contract in its history last year by contributing to Britain's Great Grid Upgrade—the most significant overhaul of the electricity grid in decades. This latest acquisition could further solidify WSP's standing as a leader in the engineering industry.