Canadian contractor SNC-Lavalin has made a US$2bn offer for Irish engineer Kentz Services. Kentz’s board has recommended that shareholders accept the offer. Christian Brown, the chief executive of Kentz, said: "Although the board of Kentz believes the company has a strong future as an independent business, it considers that this cash offer substantially recognizes the company’s growth prospects, providing certainty, in cash, to Kentz shareholders today."
A spokesperson for Kentz told GCR today that the likelihood was that Kentz would be absorbed into SNC. He said: "If approved, there won’t be a board of Kentz anymore. They will delist and it will be folded into the current oil and gas division of SNC-Lavalin. Chris Brown will continue to lead that organisation will then have about 18,500 employees."
He added that it had not been decided whether the Kentz brand would be retained or whether jobs would be cut. He said: "SNC know that the Kentz brand is a strong one, but they haven’t made a decision about it. Regarding job losses, the reason the SNC sees value in Kentz is its people. Certainly cutting jobs is not the point of the transaction."
When Amec came in, we thought they were bottom-feeding and looking for a low price– Christian Brown, chief executive of Kentz
Last year, Kentz was the subject of a corporate takeover battle between Amec and the German engineer M+W. Both offers were around the 580p a share mark, which valued the company at about $1.2bn.Â
Brown told the Financial Times that the SNC offer vindicated the board’s decision to reject the bids. He said: "When Amec came in, we thought they were bottom-feeding and looking for a low price." However, he added that the approach did lead to a re-rating of Kentz’s shares and bring the Tipperary-based company to the attention of other suitors.
Kentz is a specialist in the oil and gas services sector. It operates around the world and employs about 14,000 staff. Shares in the company rose by a third as news emerged of SNC’s offer.Â
Robert Card, the president of SNC, said the deal would give it a greater presence in the Middle East, North America and the Asia Pacific region. He said: "The proposed acquisition of Kentz is consistent with SNC-Lavalin’s strategy of becoming a global tier-one engineering and construction company, with a leading position in the oil and gas sector."
Neil Bruce, who left his post as Amec chief operating officer last year to head SNC’s resources group, said the deal strengthened the Montreal firm’s position in shale gas and oil sands. He said the company was well placed for an expected liquefied natural gas boom in western Canada. "We’ve just ticked another box, in terms of our oil and gas piece within LNG, that makes us a formidable contractor," he said.
SNC has said that 2014 is a year of rebuilding and consolidation following a string of well publicised investigations for corruption in, among other places, Libya and Bangladesh. Card has said the firm’s strategy includes expansion in the environment, water, power, mining and transportation sectors.