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Canadian engineering giant WSP Global Inc. WSP-T is buying John Wood Group PLC’s environment business in a deal that cements its position as one of the world’s dominant players in sustainable development consulting.

Montreal-based WSP said Wednesday it struck a definitive agreement to take over a business known as Environment & Infrastructure (E&I) from Aberdeen, Scotland-based Wood for US$1.8-billion, including a US$200-million deal-related tax benefit. The agreement adds 6,000 employees to WSP’s payroll from about 55,000 currently and sharpens its ability to bid on major environmental and infrastructure projects, particularly for federal government departments in the United States.

“This transaction is about expanding our leadership in earth environment and scaling our business,” WSP chief executive Alexandre L’Heureux told analysts on a morning conference call. “It is about creating more revenue opportunities together, by cross-selling to our Fortune 500 clients and by capitalizing on our fast-growing markets.”

Demand for environmental engineering and consulting services is growing as private-sector companies and governments seek advice on things ranging from climate-change risks to waste management. WSP is beefing up its capability in the space as part of a wider growth effort. The deal comes two years after it bought earth sciences specialist Golder Associates for $1.5-billion.

Once a boutique engineering company, WSP has ballooned in recent years to become a major player in global design consultancy and project management, with a current market capitalization topping $16-billion. Mr. L’Heureux wants to grow the company further, outlining a three-year strategic plan this past March that aims to boost net revenues by 30 per cent to well over $10-billion and increase adjusted net earnings per share by 50 per cent by 2024.

WSP takes a major step toward that goal by acquiring the Wood unit, doubling the size of its environmental practice in the United States and bolstering its presence in other key countries such as Canada and Britain. When the deal closes as expected in the fourth quarter this year, it will be immediately accretive to earnings and boost environment-related work to one-third of WSP’s net revenue from about one-quarter, the Canadian engineering company said.

Bolstering WSP’s expertise in water services is one outcome from the takeover, the company said. Water utilities in Britain are among E&I’s top clients and combining the businesses will create a “water hub” of scale, with more than $830-million in revenue and 4,600 employees working on contracts touching water scarcity and distribution among other problems.

WSP is paying a multiple of 14.6 times E&I’s estimated 2022 adjusted earnings before interest, taxes, depreciation and amortization, before cost savings are factored in. It is financing the purchase with a new credit facility and won’t need to sell shares to pay for it.

The deal shows Mr. L’Heureux’s team “continues to execute on its strategy in a steady, capital-savvy manner, providing a reprieve in this tumultuous market,” National Bank of Canada analyst Maxim Sytchev said in a research note. Adding E&I will boost WSP’s gross revenues from environment consulting to US$3.9-billion, including water and waste water services, further distancing the company from second-place Aecom, he said.

WSP shares gained about 5 per cent in Wednesday trading on the Toronto Stock Exchange, closing the day at $146.58. The stock is down 22 per cent since hitting an all-time high of $187.94 last November.

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