The sale remains conditional to approval from Balfour Beatty shareholders and from regulatory authorities but the transaction is expected to complete before the end of the year.
The sale price assumes cash of £67m is retained within Parsons Brinckerhoff.
Balfour Beatty said that up to £200m of the net receipts would be returned to shareholders; £85m would go to reducing the group’s pension fund deficit; and the balance would be kept to bolster the balance sheet.
Balfour Beatty bought Parsons Brinckerhoff in 2009 for £380m in a major strategic move to expand its design capabilities. However, although PB has proved profitable, there has been little melding of the two companies and no effective strategic benefit accrued to Balfour Beatty aside from the cash. It began sale proceeding in July 2014.
The consideration of £820m, less the £67m of cash retained within Parsons Brinckerhoff, represents a multiple of 11x underlying EBITDA for the year ended 31 December 2013.
Balfour Beatty said that following the sale, and the recent revaluation of its PPP portfolio, the key strategic priorities are now:
- restoring the value of the UK construction business, including progressively returning it to peer group margins;
- continuing to build on the good performance of the investments and services businesses;
- leveraging the growth opportunities in US buildings, US civils, rail and power, and the group’s Asian and Middle East joint ventures;
- realising further indirect overhead savings and shared service efficiencies across the group; and
- continuing to assess all other value creation opportunities.
Executive 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. The sale of Parsons Brinckerhoff follows the recent revaluation of our investments portfolio, which underlines the potential of this division to create value internally and across the group. 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."
Balfour Beatty has been without a CEO since the departure of Andrew McNaughton five months ago.
Headquartered in New York City, Parsons Brinckerhoff is a global professional services firm with a network of approximately 170 offices and nearly 13,500 employees on five continents.
WSP said that its strategic rationale for the acquisition was “underpinned by a strong alignment of both companies' respective values and operating models while allowing the corporation to meet most of its 2015 Global Strategic Plan objectives ahead of schedule”.
The deal makes WSP one of the world’s largest professional services firms in construction and engineering, with approximately 31,000 employees across the world and pro forma combined net revenues of $3.8 billion.
WSP president and CEO Pierre Shoiry said: “We are pleased to be joining forces with a firm of Parsons Brinckerhoff's long-standing reputation and know-how as we expect this transaction to create an industry leader, with the ability to deliver more expertise and services to our client base across the world. We expect to successfully reach the strategic objectives we had set for 2015, by creating one of the largest global pure-play professional services firms in our industry around our four pillars, namely our employees, our clients, our operational excellence and our expertise. We also anticipate that the employees of both firms will benefit from the transaction, as we integrate our talents and make the most of our greater scale to continue to develop our people, improve their career opportunities and advance their ability to work globally.”
He added: “On the integration front, building on our past success of combining Genivar and WSP, we anticipate a harmonious process which will be led by executives from both firms, with an objective of bringing together the best of both organizations.”
Parsons Brinckerhoff president and CEO George Pierson said: "This tremendously exciting transaction significantly expands opportunities for our employees and services to our clients. The compatibility of our respective cultures, each focusing on technical excellence and client service, is strengthened by the complementary technical skills we each offer. I have full confidence that by teaming with WSP, our ability to enrich our communities through projects large and small is greatly enhanced, all to the benefit of our employees, clients, and stakeholders."
On closing of the acquisition, Mr Pierson will become an executive member of the board of directors of WSP.