SNC-Lavalin made an indicative offer of 2,080 pence in cash for each Atkins share.
Atkins’ share price rapidly moved up from 1603 towards £20 per share in response.
The Atkins board indicated to SNC-Lavalin that the possible offer “would deliver value to Atkins shareholders at a level that the board would be prepared to recommend, subject to reaching agreement on the other terms and conditions of the offer”.
Talks have now opened between the two companies about other terms and conditions of a possible offer, which is conditional on, among other things, diligence and financing.
SNC-Lavalin is approximately twice the size of Atkins, with 35,000 employees around the world to Atkins’ 18,000 employees. In 2014 SNC-Lavalin paid £1.2bn to acquire Kentz Corporation, an oil & gas services company with 15,500 employees in 36 countries. An Atkins deal would top that.
For the year ending 31st March 2016, Atkins made £131.1m profit before tax (2015: £106.7m) on revenue up 6% to £1,861.9m (2015: £1,756.6m).
SNC Lavalin’s turnover dipped 11% in 2016 to just over £5bn. It's UK office is in Croydon.
Atkins had previously been subject to unconfirmed reports about a takeover approach from CH2M.
Confirming the approach, SNC-Lavalin said that if the transaction was to proceed, it would expect up to CAN$1.9bn of the CAN$3.5bn purchase price to be financed by Caisse de dépôt et placement du Québec (CDPQ) in the form of $400m in equity and a $1.5bn non-recourse loan secured by the value and cashflows of the company’s interest in Canada’s Highway 407. The balance would be raised using a mix of additional debt and equity and other financing means.
Under UK takeover rules, SNC-Lavalin now has until 5pm on 1st May 2017,either to announce a firm intention to make an offer for WS Atkins or announce that it does not intend to make an offer.