Atkinsrealis Group Inc T.ATRL

Buyback and acquisition

[Gabriel]

• Capital allocation – tuck-in M&A conversations ongoing; larger targets to come once 407 sale takes place. Excluding any (eventual) monetization from the sale of the 407, the company is in conversations for tuck-in acquisitions (300-1,500 people) in the next 12+ months, especially in the U.S., with a focus on a new platform (like Power) that would enable cross-selling with the company’s existing customers (we could also see further presence densification as ATRL remains under-penetrated in the U.S. in a variety of geographies / verticals). The 407 monetization process is ongoing and management mentioned that the last time it sold its prior participation, the endeavour took around 12 months; it would be reasonable to expect a similar timeframe due to the multiple stakeholders involved in the asset. The company will be looking to redeploy the capital from the 407 sale in a more balanced manner via buybacks/dividends as well as M&A as the criteria for any acquisition remains the same - i.e., a mid-teens IRR % as well as a low double-digit EV/EBITDA multiple ex-synergies at most (in addition to, of course, a strategic fit – we believe share buybacks have to be seriously considered in context of M&A as the current multiple, for example, under a material M&A scenario would lead to value dilution, something that Atkins shareholders have experienced in the past). The company is willing to go slightly beyond its 2.0x leverage limit for the right acquisition with enough visibility to see leverage coming back relatively rapidly towards the 1.0x – 2.0x comfort level. Beyond M&A, the company expects to be balanced with its capital allocation priorities with opportunistic buybacks and dividends (ATRL has become more active on NCIB recently).