Analysis of todayPosted by my friend Dazel on another message board. WSP paid 2.3x revenue to buy the environmental engineering consulting business from Wood PLC today. $1.9b for $830m revenue. This is a bench mark for a private cash deal in the engineering consulting space. WSP obviously think their shares are undervalued at a $17b market cap as they used debt for the purchase. They have lots of room to use their shares take over SNCL tomorrow but after this purchase how could they justify paying so little to acquire SNCL?
SNCL valuation on this purchase metric:
Backing out the capital division at $3b-$1b debt…SNCL engineering business is trading for $2.6b!
WSP’s benchmark price for a takeover would have SNCL engineering services at approx $16b ($7bx2.3)
cut that in half to $8b and add capital minus debt of $2b you have a $10b market cap or $50 per share. What the f….k is management doing about their share price.
The share price is so cheap it looks stupid…
WSP’s purchase took the stock up 5% or added $900m to their market cap so the market does not think they overpaid quite contrary so the question begs if we liquidated SNCL what would we get for selling the units off? More than $50 a share so why are we not doing that?
That is a great question to ask the board and management.