WSP Global is set to acquire the environment and infrastructure business of Wood Group for $1.81bn.
The deal includes the net present value of $200m, derived from a transaction related tax benefit.
The transaction should complete in the fourth quarter, subject to the approval of Wood’s shareholders and completion by Wood of a group reorganisation to achieve separation of the business.
The primary use of the net cash proceeds from the transaction will be a reduction in Wood’s net debt to strengthen the balance sheet and provide financial flexibility to deliver our strategy.
A statement noted that it will consider options for the best use of capital to maximise shareholder value, including:
- Ways of improving the future sustainable free cash flow of the ongoing group through early settlement of liabilities, for example removing the asbestos liability and accelerating existing regulatory payments.
- Organic and inorganic investment to accelerate strategy.
- Shareholder returns, for example through the restoration of an ordinary dividend.
Wood chief executive Robin Watson said: “This transaction will deliver significant value for our shareholders and marks a new chapter for Wood.
“It enables us to move onto our next strategic phase with the financial flexibility to accelerate our strategy to capture the growth opportunities ahead across both energy security and sustainability.
“We are focused now on the steps to complete this deal and in further developing our strategy, which we will outline in detail at a capital markets day, when my successor as chief executive is in place”.
Alexandre L’Heureux, president and chief executive of WSP, commented: “WSP’s leading Global Earth & Environment Consultancy will now have approximately 20,000 experts globally with increased capabilities and reach, including key expertise in the high growth water sector and an expanded offering to Federal and government clients.
“We look forward to having the team from E&I join us as we expand our leadership in Earth & Environment together,” he added.
As part of the sale process, Wood has agreed lender consent for the sale and a temporary amendment of the net debt to earnings covenant for its revolving credit facility.
The Wood Group’s outlook for this financial year remains unchanged from that set out in the 2021 full year results announcement in April.
“Excluding the impact of this sale, we expect higher revenue in 2022 across our business supported by the growth in our order book,” noted a statement.
Excluding the proceeds from the sale of the built environment business, Wood expects no improvement in net debt in 2022 compared to 2021. The typical working capital outflow in the first half is expected to lead to net debt being higher at 30 June 2022 than at 31 December 2021.
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