Caught in an African bribery case and facing possible blacklisting by the World Bank, one of the great names in Canadian engineering, Acres International Ltd., has quietly accepted a takeover by a larger Ontario firm.
The deal combining Acres, based in Oakville, Ont., and Hatch Ltd. of nearby Mississauga is a blockbuster in the world of privately held engineering firms but escaped public notice until now. It was completed June 1.
"No, you didn't just miss it," Hatch marketing director Tom Reid said. "We've done a lot of private acquisitions and not talked about it and this is one that we just haven't got around to broadcasting."
Neither side would discuss the terms of the deal except to say it was chiefly a stock swap in which Acres' employee-shareholders got shares in the enlarged Hatch firm and some retired employees got cash.
Hatch, founded in Toronto in 1955, is known for mining and steel mill engineering, among other specialties. Acres, which traces its roots to Niagara power projects designed 80 years ago under founder H.G. (Harry) Acres, is now a Hatch subsidiary but retains the Acres name and its own management under president Tony Hylton. It has about 700 employees, bringing Hatch's total to about 5,000.
Some of those people got acquainted a week ago today when "the management from both companies and [Acres]staff members from Oakville and Niagara Falls came over to Mississauga to meet the associates and shareowners at Hatch," Mr. Reid said.
He said Hatch went into the deal knowing of Acres' problems in Lesotho, an impoverished mountain kingdom where the firm was found guilty of bribery in 2002, and in Washington, where the World Bank, a giant among development agencies, is considering whether to bar it from bidding on further bank-financed projects for a time.
The Lesotho case involved a project official who collected bribes from foreign contractors and consultants on Africa's biggest dam and water diversion project.
In an appeal last year, Acres won a reversal of its conviction on one of two counts and had its fine reduced to the equivalent of $2.8-million from $4.2-million. The cost to its reputation is impossible to calculate.
Asked whether these troubles forced it into Hatch's arms, Mr. Reid said: "That would be a question, I think, you'd have to put to Acres themselves." John Ritchie, an Acres vice-president, said the answer was no.
The two were already on friendly terms, Mr. Ritchie said. "We have a joint venture in Newfoundland. We're working on the Voisey's Bay [nickel]project together. So we've known each other as firms that would be compatible and have considered the idea of joining together for quite a long time. The time is right now and we felt it would be a good move for us and for them. They have not had a very strong energy component to their business and we have not had a strong mining component to ours."
It is unclear how Hatch would be affected if Acres were blacklisted by the World Bank. "The bank is aware of the acquisition but we have no comment as it relates to the sanctions committee hearing into Acres International and its activities in Lesotho," said bank communications officer Damian Milverton.
Under bank rules, when the sanction committee recommends that a firm be penalized it can also recommend a penalty for "any individual or organization that, directly or indirectly, controls or is controlled by the [firm]"