WSP makes bold move with $1.8bn Power Engineers acquisition to strengthe energy sector position

WSP Global Inc. (TSX: WSP) has made a significant move in the energy sector by announcing its acquisition of Power Engineers, Incorporated (POWER) for USD 1.78 billion (approximately CAD 2.44 billion). This acquisition, unanimously approved by both companies’ boards, is set to enhance WSP’s capabilities in the Power & Energy (P&E) sector and aligns with its strategic vision to expand its global footprint and service offerings.

Strategic Acquisition to Strengthen Energy Sector Presence

The acquisition of POWER, a highly respected U.S. consulting firm with nearly 50 years of experience, marks a pivotal step for WSP. POWER, based in Hailey, Idaho, is renowned for its innovation and technical excellence in the power utilities sector. With a workforce of approximately 4,000 employees and a strong track record in managing complex projects, POWER’s integration into WSP is expected to significantly boost the company’s capabilities and market position.

The purchase price of USD 1.78 billion reflects a multiple of 15.2x POWER’s estimated 2024 pre-IFRS 16 adjusted EBITDA, or 12.5x post-synergies. This strategic investment aligns with WSP’s 2022-2024 Global Strategic Action Plan, aiming to enhance its financial performance and expand its service offerings. The acquisition is expected to complement WSP’s existing core sectors: Transport & Infrastructure, Property & Buildings, and Earth & Environment, while creating extensive cross-selling opportunities.

POWER’s Legacy and Market Influence

Power Engineers, with its nearly five-decade history, stands out for its significant contributions to the power and energy sector. Known for its engineering and consulting services, POWER has established a reputation for delivering high-quality solutions to major power utilities across North America. The firm’s technical expertise and innovative approach will enhance WSP’s existing P&E platform, which will be globally led by Holger Peller, the current President and Chief Operating Officer of POWER.

Financial and Operational Details

To finance the acquisition, WSP will utilise new term loans amounting to USD 1.78 billion and conduct an equity raise of USD 1 billion, consisting of a USD 500 million public offering and a USD 500 million private placement. This financing structure is expected to result in an estimated 2.2x pro forma net debt to adjusted EBITDA ratio. The equity financing includes a public offering of subscription receipts at a price of USD 204.50 per receipt and private placements with major institutional investors such as GIC Pte. Ltd., Caisse de dépôt et placement du Québec, British Columbia Investment Management Corporation, and Canada Pension Plan Investment Board.

Acquisition Timeline and Conditions

The acquisition is subject to customary closing conditions, including approval by POWER’s shareholders and regulatory approval in the U.S. The special meeting for shareholder approval is scheduled for September 6, 2024. WSP has secured voting and support agreements from over 99% of POWER’s shareholders, who collectively hold approximately 83% of the company’s issued shares.

Expert Opinions on the Acquisition

Alexandre L’Heureux, President and Chief Executive Officer of WSP, expressed enthusiasm about the acquisition, stating, “This acquisition represents a transformative step for WSP, positioning us at the forefront of the energy transition. It will expand our suite of innovative solutions and foster growth opportunities for our employees. By integrating POWER’s expertise with our global network, we aim to drive significant advancements in the energy sector.”

Jim Haynes, Chief Executive Officer of POWER, commented, “The merger with WSP will amplify our ability to support clients and communities as they adapt to the evolving energy landscape. We are excited about the opportunities this partnership will bring and look forward to achieving success together.”

Future Prospects

Upon completion of the acquisition in early Q4 2024, the integration of POWER is expected to enhance WSP’s service offerings and financial performance. The deal underscores WSP’s commitment to expanding its global presence in the P&E sector and advancing its strategic objectives.