Edmonton-based Stantec Inc., an engineering and infrastructure consulting company, has announced the biggest deal in its 62-year history.
The all-cash deal for Broomfield, Colorado-based MWH Global, which Stantec said is expected to close in the second quarter could increase Stantec’s annual revenues by about 60 per cent, to more than $4.5 billion, while its global headcount will increase from about 15,000 to 22,000.
The transaction will see Stantec expand in the water infrastructure sector, one of the fastest growing infrastructure areas in the world.
MWH is a privately-held global engineering, consulting and construction management company focused on water and natural resources projects. It now has 6,800 employees worldwide, with 187 offices in 26 countries.
Stantec says the deal will position it as a global leader in water resource infrastructure markets, including in the U.K., Australia, New Zealand, South and Central America, Europe and the Middle East.
The transaction significantly expands Stantec’s footprint outside of Canada and outside the struggling energy sector, where it began life as an environmental consulting firm. After the transaction, about 70 per cent of its revenues will come from outside of Canada.
Gord Johnston, Stantec’s executive vice president of infrastructure said it is “the most exciting acquisition in the history of the company,” allowing it to grow substantially in the fast-growing areas of water and transportation infrastructure.
He said the “synergies” between both companies are ideal.
“We work with the same types of clients,” he said. “About 70 per cent of their clients are public agencies, while 50 per cent of our clients are the same. Among the private clients, including mining and oil and gas firms, we work for many of the same companies.”
Johnston said in the engineering and design field, corporate culture is a key component, since there essentially are few physical assets involved. He said MWH has a culture very similar to Stantec’s, with many long-term, experienced employees.
Also the companies both have a similar history, with Colorado-based MWH having beginning 1950s as a firm focused on water infrastructure.
He said U.S.-based media reporters had asked if the acquisition would lead to job losses in centres, such as the Denver area, where both companies have a presence.
“We’re far away from deciding what will happen at our offices” where there might be duplication, he said.
However, he said there is little likelihood that will happen in Canada, since MWH has a minimal presence in the country.
Johnston said the deal is unlikely to lead to much of a growth in head office staff in Edmonton, where it employs about 2,000 people.
He said Stantec will want to maintain an MWH presence in many of the 187 offices it has maintained, adding that its strength has been in that local footprint.
The Stantec executive, who oversees the company’s 1,500 employees engaged in water infrastructure, said he’s excited about the growth prospects in that area, given the strength of MWH in the sector.
Given concerns raised recently in the U.S. about poor water infrastructure, such as the lead poisoning scare in Flint, Michigan, where poor water infrastructure was cited as the cause of lead-related health issues, he said he expects the U.S. to greatly increase its spending on water-related projects going forward.
He expects the same thing to happen in Canada, where the federal Liberal government is committed to large expenditures on infrastructure.
Worldwide it will be a growing area of expenditures as well.
In addition, MWH has a large presence in the area of transportation infrastructure — also a Stantec strength — and he expects spending to be ramped up worldwide in that area.
Stantec was founded by Don Stanley, an Edmonton native who retired from the company he founded in 1983 and passed away in 2001. He launched the business with a focus on environmental services. But, with the subsequent addition of partners Herb Roblin and Louis Grimble, with backgrounds in bridge and railway engineering, the firm diversified and grew quickly.
That growth continued over the next 30-plus years, as what was then known as Stantec Inc. became publicly-listed on the Toronto Stock Exchange (TSX) in 1994 and was listed on the New York Stock Exchange (NYSE) in 2005.
Sonia Kirby, head of investor relations for Stantec, said the company, a true Canadian success story, continues to have deep roots in Edmonton.
One of its largest recent acquisitions, prior to the MWH deal, involved privately-owned, Quebec-based Dessau, which was established in 1957 and had 1,300 employees in 20 offices located throughout the province.
Prior to that acquisition, which became effective in the first quarter of 2015, Stantec had a relatively minor presence in the province.
In a conference call that followed the release of its 2015 results, Stantec head Bob Gomes said the company will continue to focus on increasing its presence in the U.S., where it now has about 6,500 employees.
But he also said the company is planning to grow internationally, where it now has only about 300 employees and where revenues account for a small percentage of its overall operations.
— This article has been sponsored by Glacier FarmMedia as corporate sponsor to the upcoming Centrallia conference in Winnipeg, May 25 to 27.