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Stantec acquires MWH for US$793 million 20 Apr 2016

TunnelTalk reporting

Canadian-based engineering design and professional services company Stantec acquires USA-based rival practice MWH Global in a deal worth US$793 million.

Shaking on the deal: Bob Gomes, President and CEO of Stantec (left); and Alan Krause, Chairman and CEO of MWH Global
Shaking on the deal: Bob Gomes, President and CEO of Stantec (left); and Alan Krause, Chairman and CEO of MWH Global

The acquisition – which is funded by Stantec through a mix of US$525 million of new equity issue, with the balance payable from a newly negotiated US$800 million revolving credit facility with its banks – is aimed at increasing the global reach of the until-now predominantly North American focused company. Currently Stantec employs 15,000 people worldwide, across 250 offices.

A Stantec spokesman said: “Historically, Stantec’s acquisition strategy has been focused on acquisitions in North America to develop a mature presence across its business portfolio. Acquisition of MWH is expected to create a global leader in water and infrastructure markets,
and the combined company is anticipated to build on Stantec’s position as a top-tier design firm within the global water market.”

MWH is targeted on the strength of its expertise and client and project base in the lucrative and expanding water resources sector, but the company also covers many other fields in design, consultancy and engineering including mass transit and transportation, oil and gas, mining, and energy and power. It boasts a network of 187 offices in 26 countries, and employs 7,000 personnel. MWH is regarded as offering Stantec, which conducts engineering design and consultancy services across similar fields but on a less global scale, the possibility of synergies in the domestic North American market as well as the possibility of increasing opportunities for offering international design and consultancy services.

Stantec also considers that by combining resources the new company will be better able to offer whole-of-project and whole-of-life-cycle design and engineering services, especially in the UK and USA where MWH holds lucrative contracts; as well improving its ability to maximise offerings in the engineering and construction sector, especially on large-scale mega-projects and on design-build projects.

Bellwood Rock Quarry, part of the Atlanta Raw Water Delivery System Project
Bellwood Rock Quarry, part of the Atlanta Raw Water Delivery System Project

Stantec says the acquisition will “expand its geographic footprint” on the grounds that
 MWH maintains a strong position in international markets through its operations in the UK, Australia, New Zealand, South and Central America, Europe and the Middle East. This, it says, should provide Stantec “with immediate geographic breadth, creating a platform for expansion and diversification. Management expects that the combination of complementary capabilities, market presence, and cultures of each of MWH and Stantec will create the opportunity to service more clients with a broader range of services, worldwide.”

Bob Gomes, Stantec President and CEO, said: “MWH brings a global presence and reputation in water infrastructure that will advance Stantec’s position as a top-tier design firm within the highly attractive global water market. Together, we share a commitment to our communities and have the combined talent to support the most technically advanced clients and projects locally and around the world.”

Alan Krause, MWH Chairman and CEO, said: “We are excited to join the expertise and experience of Stantec and MWH in a transaction that will enable us to thrive and grow amidst an increasingly complex industry landscape by strengthening our combined ability to solve the most pressing water, transportation and infrastructure challenges today. Our highly complementary cultures, shared approach to client service and extended global reach should yield multiple benefits for our clients, employees and the communities we serve.”

Lovat TBM for the Brightwater Wastewater Conveyance Tunnel
Lovat TBM for the Brightwater Wastewater Conveyance Tunnel

Stantec is involved in, or has been involved in, a variety of underground construction projects, primarily in the USA and Canada. These include the Atlanta Raw Water Delivery System, which consists of 8km of 3m diameter tunnels in hard and abrasive gneiss bedrock, use of the 2.4 billion gallon Bellwood Rock Quarry for raw water storage, two major construction shafts, a raw water intake, and three pump stations. The tunnel varies in depth from 80m to over 150m. The project will be delivered via a CM@Risk contract, making it one of the largest such tunnels ever built in North America. Other Stantec tunnel projects in the portfolio include the Ottawa Combined Sewage Storage Tunnel (6.6km of tunnels x 2-3m diameter); plus numerous other city-level storage and diversion tunnel solutions, primarily in the wastewater sector. MWH, which was involved in final design of the Brightwater Wastewater Conveyance Tunnel in Seattle, USA, is involved in numerous hydro and waste/clean water projects around the world, and acquisition by Stantec affords the possibility of winning a larger number of international contracts that involve underground construction, especially on large projects that require a healthy balance sheet. The company was also involved in pre-procurement owner design on the Lake Mead project in Nevada USA.

A Stantec spokesman explained: “The acquisition of MWH will create growth opportunities. MWH brings a history and experience of operating in global markets. Augmented by Stantec’s strong balance sheet, history of operational effectiveness and experience in successfully completing and integrating acquisitions, the combined company is expected to be well positioned to grow both organically and by acquisition in the future.”

He added: “Additionally, the expertise available within the MWH construction business is expected to augment and improve Stantec’s consulting services business by allowing it to better prepare for and execute on design-build projects with other construction partners in both the water markets and other sectors in which Stantec participates in design-build projects.”

Under the terms of the deal, key members of the management team of MWH, including the presidents of key business units, will join Stantec in significant leadership positions. Alan Krause, MWH Chairman and CEO, and David Barnes, MWH Chief Financial Officer, will both also be joining Stantec to ensure a smooth and successful integration.

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