Bullboard - Stock Discussion Forum WSP Global Inc T.WSP

Alternate Symbol(s): WSPOF

Industrials Conglomerates

WSP Global Inc. is a Canada-based professional services firm. The Company provides strategic advisory, engineering and design services to clients seeking sustainable solutions in the transportation, infrastructure, environment, building, energy, water and mining sectors. It also offers highly specialized services in project and program delivery and advisory services. Its segments include Canada... see more

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TSX:WSP - Post Discussion

WSP Global Inc > TD Upgrade

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Post by retiredcf on Jun 02, 2022 1:19pm

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WSP Global Inc.

(WSP-T) C$146.58

WSP Acquiring John Wood's Environment & Infrastructure Business

Event

Yesterday morning, WSP announced the acquisition of the Environment & Infrastructure ("E&I") business of John Wood Group plc for an aggregate cash consideration of US$1.81bln (C$2.31bln).

Impact: POSITIVE

We view the acquisition positively, both strategically and financially.
Strategically, the acquisition is very well-aligned with and helps WSP realize

the objectives set out in its 2022-2024 Global Strategic Action Plan, including continuing to grow its revenue via acquisition and further expanding its presence in the rapidly growing earth and environmental sector.
The transaction value of the acquisition represents 14.6x E&I's 2022E pre- IFRS 16 adjusted EBITDA, or 11.5x post-synergies, which looks attractive vs. where WSP was trading before the announcement. Specifically, before the announcement, we calculate that WSP was trading at an EV/EBITDA multiple of 15.2x our pre-IFRS 16 2022 EBITDA estimate (equivalent to 12.5x 2022E EBITDA including IFRS 16).
According to WSP, E&I is expected to generate 2022 net revenue of ~US $830mm (~C$1,050mm) and adjusted EBITDA margins (on a pre-synergy and post-IFRS 16 basis) of 16.0–17.0% (vs. our standalone WSP 2022E EBITDA margin of 17.2%). On the conference call, management indicated that its goal is to raise E&I's margin profile to a level equivalent with WSP and Golder's combined operations.
The acquisition is being financed by a new US$1.81bln term credit facility. WSP expects a pro forma net debt-to-adjusted EBITDA ratio of 2.0x upon closing, and sees leverage declining to ~1.6x by YE2022 (note: WSP's stated target leverage range is 1.0x–2.0x). The transaction is expected to close in Q4/22.
We have incorporated the E&I acquisition into our model. Our 2022 EBITDA estimate increases slightly, while our 2023 EBITDA estimate increases by ~11%. Our target price increases to $185.00 (from $180.00).

TD Investment Conclusion

With respect to WSP's standalone/pre-E&I business, we believe that the company's outlook is favourable. Further, we view the acquisition of the E&I business as positive (both strategically and financially). We reiterate our BUY rating.