Stantec offices in Edmonton.
Engineering firm Stantec Inc. is acquiring the Canadian engineering assets of Dessau, one of the companies caught up in the controversy over corruption in public works contract bidding in Quebec.
Edmonton-based Stantec said on Wednesday the transaction will "significantly strengthen its presence" in Quebec. The price was not disclosed.
About 1,300 Dessau employees will join Stantec. The deal is expected to close in the first quarter of 2015.
It is the latest in a series of acquisitions as the sector undergoes consolidation. SNC-Lavalin Group Inc., for example, announced in June a $2.1-billion agreement to buy British-based oil-and-gas services specialist Kentz Corp. And Montreal-based WSP Global Inc. said earlier this month it plans to acquire professional services firm Parsons Brinckerhoff Group Inc. for $1.24-billion.
"With nearly 25 per cent of the Canadian population and a large infrastructure market, expanding in Quebec represents a substantial, long-term opportunity for us in a growing market," Stantec president and chief executive officer Bob Gomes said.
"Dessau's engineering expertise will provide a geographic complement to our work, which will strengthen our overall expertise in healthcare, water, power and energy, roadways, bridges, airport, transit/rail, and community development sectors, as well as introducing telecommunications and security services as part of the broader Stantec platform."
Last year, privately held Dessau was banned from obtaining public works contracts in the province for five years after an executive admitted to practices that included collusion and illegal political party financing.
It was subsequently cleared by Quebec's securities watchdog after it provided satisfactory proof of significant reform and can once again bid on public works projects. But it remains subject to penalties.
"This company [Dessau] has gone through a lot of difficulties and changes over the last two years. They came out of this much stronger," Mr. Gomes said in an interview.
"This is good news for them and we believe for Quebec. Our goal is to continue to grow in Quebec."
Desjardins Securities analyst Benoit Poirier said in a research note Wednesday that "we anticipate a mixed reaction from the market, given the attention Dessau has received for its past involvement in collusion related to public contracts in Québec and the absence of clearly defined penalties that will eventually be paid by culpable firms being investigated by the ongoing Charbonneau commission."
He added it is "unlikely that [Stantec] would have pulled the trigger on the transaction without conviction that the risks to Dessau's business were well contained."
The acquisition will make Stantec the second biggest engineering firm in Canada -- with about 10,000 employees in the country – after SNC-Lavalin and its roughly 16,000 staff in Canada, Mr. Gomes said.
"The market has been itching for Stantec to make a larger acquisition given company's stellar track record, very strong balance sheet and high trading multiple," Dundee Securities analyst Maxim Sytchev said in a research note Wednesday.
"With lack of historical (meaningful) presence in Quebec, Stantec is entering the geography at arguably the best time in decades given the dislocated nature of QC spending (post corruption fallout driven; that being said, the need to spend is definitely there) that we believe will start playing catch up to a more normalized level."
Bertrand Marotte