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Kentz agrees £1.2bn tie-up with SNC-Lavalin

Canadian oil services group SNC-Lavalin has launched a £1.2bn recommended takeover bid for FTSE 250 engineering company Kentz
June 23, 2014

Canada’s largest engineering and consultancy group, SNC-Lavalin, has reached an agreement to take over Kentz (KENZ), the FTSE 250 engineering company focused on the energy and resources sectors.

IC TIP: Hold at 929p

The all-cash offer of 935p a share values Kentz at £1.2bn and represents a 33 premium to the company’s share price before the offer. It is also substantially above a previous indicative approach for Kentz made by Amec (AMEC), the FTSE 100 oil services group, last summer which valued it at less than £700m, or between 565p and 580p a share. After that bid was abandoned, Kentz expanded its footprint in Latin America and the US shale gas market by acquiring oil services group Valerus Field Solutions for £265m in cash.

“We feel that the [SNC-Lavalin] offer recognizes the value of our future prospects, world-class client base, and our excellent people, the ultimate assets of our business,” Kentz’s chief executive officer, Christian Brown, said in a statement. “It also offers certainty, in cash, to Kentz shareholders today”. Mr Brown said the tie-up with SNC-Lavalin also vindicated the company’s rejection of Amec’s bid last year, which he described as “bottom-feeding” and “highly conditional”. Kentz’s board unanimously recommends the deal.

SNC-Lavalin says oil and gas offers higher growth than other sectors and that the purchase of Kentz would help it better compete for midstream and upstream energy projects.