WSP Global’s acquisition of New York-based Parsons Brinckerhoff from Balfour Beatty earlier this week for £820m ($1.352m) substantially increases its presence in the UK market, according to Michael Dall, lead economist at Barbour ABI.
It calculates that Parsons Brinckerhoff has more than 50 projects in the UK with a total project value of more than £4bn that will now come on to WSP’s books. These include the £800m Trafford power project and the development of a £500m gas turbine power station in Kent.
But Dall believes that WSP could have had its eye on another prize. “WSP may well have been enticed by Parsons Brinckerhoff’s current involvement in the HS2 phase one development. Given that the total value of HS2 phase one is in excess of £17bn it is likely that this was an additional factor when WSP were making their decision.”
"The Board believes that the sale price of £820m delivers both a significant return on our original investment and a compelling level of value creation for shareholders – which remains the key focus of the Board."
Steve Marshall, Balfour Beatty
According to the press statement on WSP Global’s website, the deal “expands WSP’s presence in the UK and provides the firm with a stronger presence in key growth regions such as Asia and Australia”.
Parsons Brinckerhoff has a network of approximately 170 offices and nearly 13,500 staff around the world. The deal means that Montreal-based WSP will grow to a 31,000-strong business. WSP plans to issue shares worth $500m to finance the deal, underwritten by a $600m credit facility with a consortium of lenders.
Balfour Beatty sold Parsons Brinckerhoff at what is seen as a good price, although The Guardian reported that the £820m headline figure reduces to around £700m after £67m is assigned to PB itself, £50m is earmarked for fees and transaction costs, and £30m covers the cost of “separating” the two businesses.
However, it says this means Balfour Beatty still “doubled its money on Parsons” over its five years of ownership. It paid $626m (£380m) in 2009.
In an editorial the paper says: “Balfour, with a cleaner balance sheet and a £1bn public-private portfolio, now has a chance to restore some health to its share price. If it can’t, Carillion – and others – are free to try their luck again.”
In a statement accompanying the deal, Balfour Beatty chairman Steve Marshall said: “The Board believes that the sale price of £820m delivers both a significant return on our original investment and a compelling level of value creation for shareholders – which remains the key focus of the Board.
“In the US, our core construction business is well positioned in a recovering market. In the UK we see the potential for margins to progressively recover to peer group levels. Our services business, meanwhile, is well placed to benefit from the growing investment in infrastructure. Together, these elements will provide a strong foundation for an incoming group CEO to take the company forward.”
