Canadian engineering giant WSP Global Inc. WSP Global Inc. is dramatically expanding its environmental consulting capability, buying earth sciences specialist Golder Associates in a deal it says will make it the world’s second biggest player in that business.
Montreal-based WSP struck an agreement to buy Golder parent Enterra Holdings Ltd. for $1.5-billion in cash, the companies said Thursday. It is WSP’s largest acquisition, just ahead of the purchase six years ago of Parsons Brinckerhoff for $1.4-billion, and the latest in a relentless expansion that shows no sign of slowing.
Singapore’s sovereign wealth fund GIC Private Limited and the British Columbia Investment Management Corp. (BCI) are providing funding for the transaction as new strategic shareholders in WSP. They’ll join WSP’s existing institutional investor base, including the Caisse de dépôt et placement du Québec and Canada Pension Plan Investment Board, who are all vowing to back the company in its future growth ambitions.
“We wanted to take a big step and take a leadership role in the environmental consulting space and I think we’re achieving that with this transaction,” said WSP chief executive Alexandre L’Heureux. An estimated $10-trillion in COVID-19 stimulus across the global will partly be used for making transitions to low-carbon economies, which provides the company with a unique opportunity, he said.
Once a boutique engineering company known as Genivar Inc., WSP has ballooned in recent years to become a major player in global design consultancy and project management. It has worked on many of the world’s tallest skyscrapers, such as London’s Shard and New York’s Central Park Tower, and also had a hand in the redevelopments of New York’s La Guardia Airport and Toronto’s Union Station.
Mississauga-based Golder is a private, employee-owned company with a staff of 7,000 in 30 countries. Founded in 1960 by Larry Soderman, Victor Milligan and Hugh Golder, it does in-depth environmental consulting, providing advice to blue-chip, Fortune 500 and government clients.
Golder’s recent projects include using drones to support the remediation of Yellowknife’s Giant Mine, investigating influences on air pollution in Canterbury, New Zealand, and helping to clear away the environmental hazards of Ottawa’s old Union Station so it could be repurposed as the temporary home of the Canadian Senate. The company generates about $1-billion in annual revenue, boasts profit margins averaging 17 per cent, and is currently involved at about half the world’s mine sites in a variety of advisory capacities, Mr. L’Heureux said.
WSP shares jumped 11.6 per cent to an all-time high of $108.04 in trading Thursday on the Toronto Stock Exchange. The company now has a market capitalization of $12.2-billion. By that measure, WSP is three times bigger than Quebec’s other major engineering firm SNC-Lavalin and also has more employees: 47,000 to SNC’s 40,000 at last count.
The company roughly tripled in size when Genivar bought British professional services provider WSP Group PLC in 2012, then doubled in size with the purchase of U.S.-based Parsons Brinckerhoff in 2014. This latest deal is equally transformative and the courtship was years in the making, said WSP chief financial officer Alain Michaud.
The acquisition will propel WSP to the No. 2 spot of global environmental consulting companies by revenue, behind California-based Aecom, according to a company presentation to investors. Not including water and waste services, WSP will be number one, with fully one-quarter of its $8-billion pro-forma net revenue coming from earth sciences and environment-related contracts once the deal is done and 14,000 people dedicated specifically to that work.
Demand for environmental engineering services and sustainable infrastructure development is growing and the acquisition of Golder positions WSP well to capitalize on that, Mr. L’Heureux said in an interview. He added that “the mindset of the corporate world is changing very rapidly” in terms of the greater attention it is devoting to environmental, social and governance concerns.
“WSP has been at the forefront of change within the industry and this acquisition is no different,” Laurentian Bank Securities analyst Mona Nazir said. “The company is continuing on its ‘green’ evolution and addressing growing ESG concerns directly.”
GIC, one of the world’s biggest sovereign wealth funds, is making a $260-million investment in WSP to help finance the transaction while BCI is investing $50-million. Both will receive subscription receipts convertible to shares. The balance is being funded with new bank debt worth $1.2-billion.
“As a long-term investor, we firmly believe in the strategic merits of this transaction and are confident the sector will continue to flourish as businesses increasingly look to improve their sustainability practices,” said Arjun Khullar, head of GIC’s integrated strategies group. He said GIC is open to expanding its relationship with WSP on future opportunities.
Bringing GIC and BCI in as strategic investors was done in collaboration with the Caisse and CPPIB, Mr. L’Heureux said. “We want to increase our firepower [on potential deals] for the years to come,” he said.
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