Canadian giant to go shopping with $2.9bn from Warren Buffett

7 May 2014

SNC-Lavalin, Canada’s largest construction company, is looking at boosting its business with an acquisition following its disposal of its AltaLink power transmission business to Berkshire Hathaway for US$2.9bn.

Robert Card, SNC’s chief executive, told the Montreal Gazette last week that he was planning to use the deal with Warren Buffett’s investment company to make an acquisition in the construction and engineering field, although he said he was still researching leads.

SNC’s share price rose 5.1% on news of the deal, which many analysts believe put a premium price on AltaLink.

The subsidiary owns more than half the electricity grid in the Canadian province of Alberta and serves 85% of its population. Net income for the unit was US$150m last year. AltaLink will operate under its current name within the Berkshire business and continue to be based in Calgary.

Pierre Lacroix, an analyst at Desjardins Securities, said in a note to investors: "In our view, an acquisition represents a major catalyst over the next six to 12 months. SNC has indicated that it could also entertain a buyback or dividend if a suitable acquisition is not possible."


The sale of AltaLink is Card’s boldest move since he took the helm of the Montreal-based company in October 2012. Card, the first American chief executive of SNC-Lavalin and formerly a divisional president for CH2M Hill, took over a company in dire straights.

Corruption scandal

In recent years SNC-Lavalin has become best known as the company embroiled in a bizarre corruption scandal that centred on its ties with the Gaddafi regime in Libya, but also involved the payment of bribes to win the Padma bridge project in Bangladesh, a power station in Cambodia and a dam in Angola, as well as a hospital in Canada.

At the height of the scandal in 2012, the authorities in Canada, Mexico and Switzerland were investigating SNC’s involvement with Libyan dictator Moammar Gadhafi’s son, Saadi – specifically, an alleged plot to smuggle Saadi into Mexico.

Last year, the World Bank banned SNC from bidding for its contracts for 10 years.

The scandal resulted in the arrest and indictment of several former SNC-Lavalin executives, including Pierre Duhaime, the company’s former chief executive.

The future

Now that SNC is under new management, however, it has been to some extent rehabilitated.

SNC-Lavalin has stressed its commitment to a high standard of business ethics in, among other places, this open letter to the population of Canada (SNC)

In February last year it hired the former ethics chief of Siemens AG to guide the company on corporate governance. In February this year, Quebec’s financial markets authority allowed the company to bid on public contracts after reviewing its "ethics and compliance" programme.

As well making an acquisition with its AltaLink windfall, the firm is seeking infrastructure concessions such as airports, toll roads and bridges to offset slumping sales in divisions such as metals and mining.

It is hoping to revitalise its nuclear business by realising a long-standing ambition to sell its Candu reactors to the Chinese government, and to offer them to Chinese firms looking to build reactors in third countries. The first potential site is in Romania, where China is considering the construction of two nuclear power stations.

Officials from Candu Energy Inc. are leading a Canadian nuclear industry mission to China this week, which includes a visit to the Qinshan nuclear power station south of Shanghai where two heavy-water Candu 6 reactors are in operation. Candu Energy is the former Atomic Energy of Canada, which was bought by SNC for US$13.7m in 2011.

At the end of last month SNC won a contract from the Abu Dhabi National Oil Company to provide engineering design for the exploitation of the second phases of the Qusahwira Oil Field

SNC is ranked 96th in Engineering News-Record‘s list of top 250 global contractors with a turnover of $3bn. It has office in some 40 countries and is active in about 100.

Story for GCR? Get in touch via email: [email protected]

Latest articles in Companies