Post by
retiredcf on Sep 27, 2022 9:23am
CIBC
Have a $181.00 target. GLTA
EQUITY RESEARCH
September 26, 2022 Flash Research
WSP GLOBAL INC.
TTEK Competing Bid For RPS Group
Tetra Tech (TTEK) and RPS Group (RPS) announced late Friday that TTEK has agreed to buy RPS for £2.22/share. WSP announced this morning that it is considering its options and a further announcement will be made in due course. Note that RPS is now trading at a slight premium to TTEK’s offer.
• The new bid from TTEK represents a 7.8% premium to WSP’s own
£2.06/share offer made in August. RPS’s Board has recommended
shareholders vote for the TTEK offer. TTEK indicates that it has received
support from ~28% of RPS shareholders (needs 75% approval).
• TTEK estimates the cost synergy potential (fairly similar to WSP) at
£21MM in cost synergies and expects mid-to-high-teen percent accretion
to adj. EPS after realizing the full benefit of cost synergies and
integration.
• If WSP were to submit another bid 5%-10% (£2.33-$2.44/share) superior to TTEK’s bid of £2.22/share, the transaction would represent a post synergy EV/TTM adj. EBITDA multiple of ~10x-10.5x (including financial leases in EV) on a post-IFRS 16 basis, lower than WSP’s own multiple of 12.7x EV/2023E EBITDA. In these scenarios, we estimate that WSP’s 2022E pro-forma net debt / adj. EBITDA ratio would get to ~2x.
• RPS will postpone the shareholder meeting from September 26
(originally set in connection to the WSP offer) to November 21 given
TTEK’s proposed offer. RPS notes this is a technical postponement and
the exact dates will be provided in due course.
RPS Background: RPS has ~5,000 employees and generates~$835MM in run-rate net revenues. RPS generates the majority of its revenue from the U.K. and Australia, and also has a sizeable presence in the Americas.
Roughly two-thirds of revenues are from environmental work and water
services. Refer to our August 16 report.