Buying Kentz, which is a global oil and gas services company with 14,500 employees in 36 countries, puts SNC-Lavalin on the path to become a global tier-1 engineering and construction services firm.
According to SNC Lavalin management, the addition of Kentz's capabilities would make SNC-Lavalin a leading global E&C player in the oil and gas sector, with a greater presence in key growth regions including the Middle East, North America and Asia Pacific.
It will also give SNC-Lavalin a significant presence in Australia and North America, particularly in the US.
The deal will also help SNC-Lavalin balance its risk portfolio by greatly increasing the percentage of revenues it draws from services.
SNC-Lavalin Group president and CEO Robert Card said the company looked forward to adding Kentz and strengthening its capabilities in oil and gas.
"We are excited by the prospect of merging the excellent capabilities of our two oil and gas teams under the leadership of Christian Brown, Kentz CEO, which will create a world class team inside of SNC-Lavalin to better serve our combined clients worldwide.
"This proposed acquisition and the agreement to sell AltaLink are important milestones in our stated strategy for growth."
Brown said the Kentz board unanimously agreed that the SNC-Lavalin offer recognised the value of Kentz's future prospects, client base and its people.
"Our track record in providing complex engineering and construction solutions to the energy sector globally has evolved considerably from our first international projects in the 1970s and many of the people instrumental to our growth remain with us today," he said.
Under the terms of the acquisition Kentz shareholders get $C17.13 for each Kentz share they hold.
That price represents a 33% premium to the closing price on Kentz shares on June 20, the last business day before the acquisition deal was announced.
It also represents a 33% premium to the volume weighted average price of a Kentz share for the 30-day period prior to the announcement.
The acquisition is expected to grow SNC-Lavalin's head count by about 14,500, creating a combined company of about 44,500, with 18,500 of them dedicated to the oil and gas industry.
The deal will also grow SNC-Lavalin's order backlog by $C4.9 billion to $C13 billion.
About 78% of that $C4.9 billion is expected to come from lower risk, higher margin services based contracts.
The deal adds upstream capabilities, LNG expertise and unconventional oil and gas skills to SNC Lavalin.
It also improves SNC Lavalin's ability to carry out larger and more complex oil and gas projects.
SNC Lavalin will be using an asset sale bridge loan of $C2.55 and a term loan of $C200 million to finance the purchase.
