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

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Post by retiredcf on Sep 26, 2022 8:36am

TD

Have a $190.00 target. GLTA

WSP Global Inc.

(WSP-T) C$152.38

Competing Takeout Offer for RPS Group Announced by TTEK-Q Event

On September 23 (after market close), consulting/engineering services company Tetra Tech, Inc. (TTEK-Q) announced a competing acquisition offer for RPS Group (RPS-LN) — the 5,000-employee, U.K.-based consulting firm that WSP Global agreed to acquire in early-August (see our WSP Action Note).
TTEK has offered to acquire RPS for 222 pence/share in cash (£636mm equity value), representing a 7.8% premium to WSP's 206 pence/share cash offer.
RPS' Board intends to unanimously recommend TTEK's offer, while it has withdrawn its recommendation of WSP's offer. Further, TTEK has received support (i.e., undertakings/LOIs to vote in favour of its offer) from holders representing ~28% of RPS' outstanding shares.

Impact: SLIGHTLY NEGATIVE

We viewed WSP's announced acquisition of RPS positively, both strategically and financially, and accordingly, we view the emergence of a competing offer negatively.
We expect WSP to assess its options and make a further announcement in due course (over the coming weeks) on how it intends to proceed with respect to the RPS acquisition. That said, we can envision and see the merits of a scenario in which WSP submits a raised offer for RPS to secure the acquisition (discussed below). Still, we expect WSP to remain disciplined, and would not rule out the potential for WSP to walk away from the RPS deal (particularly if a potential raised WSP bid is subsequently topped), permitting WSP to focus on other M&A opportunities.
TTEK's offer implies a transaction value equivalent to 9.5x RPS' TTM EBITDA (post-IFRS 16 and post-cost synergies), whereas WSP's offer implied a 9.1x valuation (vs. WSP's own 14.7x EV/TTM EBITDA multiple when its RPS offer was made).
To secure the support of all shareholders who have undertaken to vote in favour of TTEK's offer, a competing offer would need to exceed TTEK's offer by at least 10% (implies at least ~245 pence/share or an incremental ~£111mm).
A 245 pence/share offer would equate to an EV/TTM EBITDA valuation of 10.6x; still attractive for WSP, in our view. Regarding EPS impact, our WSP 2023 EPS estimate would decline by ~$0.04 (to $6.98) if WSP were to increase its offer for RPS to 245 pence/share.