SNC-Lavalin CEO Neil Bruce said on Thursday Elliott Capital Advisors‘ stake in WS Atkins is not an “obstacle” to buying the British engineering and construction company, after the U.S. hedge fund disclosed a 6.8 percent shareholding last week.
Elliott said in a filing that it acquired the stake in a contracts-for-difference deal on April 21, the day after Atkins agreed to be acquired by the Canadian construction and engineering group.
Bruce made the remark to journalists in Montréal after SNC held its annual meeting, declared a dividend and reported higher adjusted quarterly profits in its core engineering and construction business. He said SNC still plans to close the deal around the end of July.
SNC reported $89.7 million (US$65.19 million) in net income attributable to shareholders, down from $122.1 million (US$88.75 million) for the first three months of 2016, which included gains from sales in its capital division.
Bruce said SNC is shortlisted for a handful of infrastructure projects in Canada. “I would hope that throughout 2017 we will be winning and announcing a minimum of two projects in the infrastructure sector,” he said.
Bruce told analysts that the company still aims to meet a core business EBIDTA (earnings before interest, tax, depreciation and amortization) margin target of 7 percent this year. For the quarter, the adjusted engineering and construction EBIDTA margin rose to 5.6 percent from 5.2 percent a year earlier.
The company backed its forecast for 2017 adjusted profit from engineering and construction of $1.70-$2 per share, excluding Atkins.
The Atkins deal creates a global company with $12.1 billion in revenues and 53,000 employees.
Canadian pension fund Caisse de dépôt et placement du Québec, SNC’s biggest shareholder, will extend a loan of $1.5 billion (US$1.09 billion) to SNC to help finance the acquisition. Bruce told reporters he’d be happy to do similar financing deals with the Caisse in the future.
“It’s something that’s available to us that maybe isn’t available to some of our competitors,” he said. “We think it’s a real differentiator.”
SNC’s board declared a cash dividend of $0.273 per share, payable on June 1, 2017 to shareholders of record on May 18, 2017.
SNC board Chairman Lawrence Stevenson said he will step down at the end of the year.
Total revenue fell 7 percent to $1.85 billion, and missed analysts’ average estimate of $1.90 billion, according to Thomson Reuters I/B/E/S.
Update: In addition to providing a $1.5 billion loan in support of SNC’s acquisition of Atkins, the Caisse has agreed to buy $400 million of equity in the company.
(Reporting by Allison Lampert in Montreal; Additional reporting by John Benny in Bengaluru; Editing by Sai Sachin Ravikumar and James Dalgleish)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
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