WSP (TSX: WSP) (“WSP”, the “Corporation”, “we”, “us” or “our”), a leading global professional services firm, proudly announces it has entered into an agreement to acquire Power Engineers, Incorporated (“POWER”) a prominent U.S. consulting firm with a leading presence in the Power & Energy (P&E) sector (the “Acquisition”). The Acquisition has been unanimously approved by the boards of directors of both companies. The proposed Acquisition is a strategic move in alignment with WSP’s vision to expand and enhance its P&E services, positioning the Corporation at the forefront of the industry.
POWER stands out with its nearly 50-year legacy of innovation and technical excellence, a highly respected brand, and a reputation for delivering quality services on complex projects. Based in Hailey, Idaho, POWER’s impressive team of approximately 4,000 employees, including approximately 900 shareholders, has a proven track record of serving the most prominent power utilities in North America.
The Acquisition, with a purchase price of US$1,780 million (approximately $2,443.9 million), reflects POWER’s estimated 2024 pre-IFRS 16 adjusted EBITDA at a multiple of 15.2x, or 12.5x post-synergies. This strategic investment is expected to enhance WSP’s financial performance and contribute to meeting and exceeding the objectives of the Corporation’s 2022-2024 Global Strategic Action Plan.
Once the proposed Acquisition is closed, the integration of POWER is expected to complement WSP’s existing three core sectors: Transport & Infrastructure, Property & Buildings, and Earth & Environment; it will also create extensive cross-selling opportunities. Welcoming POWER to our already strong P&E platform, which will be led globally by Holger Peller, the current President and COO of POWER, is anticipated to drive accelerated growth.
The proposed Acquisition underscores WSP’s commitment to its long-term vision and 2022-2024 Global Strategic Action Plan, marking a pivotal step in building a leading global P&E franchise. WSP is thrilled about the prospect of welcoming POWER to the WSP family and is eager to explore the new opportunities this partnership will bring.
“The acquisition will mark a transformative step that will position us at the forefront of the energy transition. This opportunity brings forth a wealth of strategic benefits, including an expanded suite of innovative solutions for our clients and continuous professional growth opportunities for our employees,” commented Alexandre L’Heureux President and Chief Executive Officer of WSP. “By uniting WSP’s extensive global network and POWER’s deep technical expertise, we are poised to provide exceptional solutions and service quality to foster significant advancements in the communities we serve. The trust of our shareholders and our commitment to excellence will empower us to influence the future of the energy sector as we plan to expand our reach and power a sustainable future across the globe.”
Also commenting on the Acquisition, Jim Haynes, Chief Executive Officer of POWER said: “POWER and WSP truly are stronger together. By joining forces, we can supercharge our ability to help clients and communities around the world adapt to the changing energy landscape—and provide more opportunities for our team members to work on the most challenging projects. We’re looking forward to building success together with WSP.”
FINANCIAL HIGHLIGHTS
- Proposed Acquisition of POWER for a total cash purchase price of US$1,780 million (approximately $2,443.9 million).
- Incentive awards of up to US$170M to be paid to a significant number of employees generally over three years following closing of the Acquisition.
- Acquisition price represents 15.2x POWER’s 2024E pre-IFRS 16 Adjusted EBITDA3 before cost synergies, or 12.5x post-synergies.
- Expected to be immediately accretive to WSP’s adjusted net earnings per share before synergies. WSP expects 2026 Accretion (as defined below) to be in mid-single digits once cost synergies are fully realized.
- Expected cost synergies of a minimum of approximately US$25 million are expected to be achieved by the end of 2026, with 50% expected to be realized in 2025.
- Transaction to be financed with approximately US$1,780 million New Term Loans (as defined below), expected to result in an estimated 2.2x pro forma net debt to adjusted EBITDA ratio upon closing.
- Equity raise of $1,000 million: $500 million private placements with $500 million bought deal public offering (subscription receipts) expected to close on or about August 19, 2024, with a corresponding reduction of the amounts drawn from the New Term Loans.
- Acquisition expected to be completed in the early fourth quarter of 2024, subject to the satisfaction of closing conditions.
CONDITIONS TO THE ACQUISITION
The Acquisition is subject to certain customary closing conditions, including (i) approval by POWER shareholders, and (ii) regulatory approval in the U.S. The special meeting of the POWER shareholders to consider and vote on the Acquisition is expected to be held on or about September 6, 2024 (the “Special Meeting”). The Acquisition is expected to be completed in the early fourth quarter of 2024.
The Corporation has obtained voting and support agreements in favour of the Acquisition for over 99% of the shares held by the POWER shareholders (including POWER’s management committee and employee directors) who hold together approximately 83% of all of the issued and outstanding POWER shares. Under this agreement, such shareholders have also agreed to vote against any other proposal for a period of three months from the date of the transaction agreement.
The transaction agreement provides for a customary non-solicitation covenant on the part of POWER, which is subject to limited “fiduciary out” provisions until the POWER shareholders vote at the Special Meeting, and a right in favor of WSP to match any “superior proposal” that POWER may receive. WSP will receive a termination fee should the transaction agreement be terminated in connection with a superior proposal or a change in recommendation by the board of directors of POWER.
ACQUISITION FINANCING
Equity Financing
The Equity Financing (as defined below) comprises:
- Approximately $500 million bought deal public offering (the “Offering”) of subscription receipts (the “Offering Subscription Receipts”) at a price of $204.50 per subscription receipt (the “Offer Price”); and
- Approximately $500 million private placements (collectively, the “Concurrent Private Placement” and together with the Offering, the “Equity Financing”) of subscription receipts (the “Placement Subscription Receipts”) at the Offer Price to four existing shareholders of the Corporation, namely (i) GIC Pte. Ltd or one of its affiliates (“GIC”), (ii) Caisse de dépôt et placement du Québec (“CDPQ”), (iii) British Columbia Investment Management Corporation or one of its affiliates (“BCI”), and (iv) a Canadian wholly-owned subsidiary of Canada Pension Plan Investment Board (“CPP Investments” and collectively with GIC, CDPQ and BCI, the “Investors”).
WSP intends to use the net proceeds from the Equity Financing to fund in part the purchase price payable in respect of the Acquisition (and related costs and expenses) and accordingly reduce amounts to be drawn on the closing of the Acquisition under the New Term Loans (as defined below) to fund the purchase price for the Acquisition.
