Stantec (TSX, NYSE: STN), a global leader in sustainable design and
engineering, today announced it has entered into share purchase
agreements (the “Acquisition”) to acquire the North America and
Asia Pacific engineering and consulting groups (“the Select
Assets”) of Cardno Limited (“Cardno”). Under the terms of the
Acquisition, Stantec will acquire the Select Assets for aggregate
cash consideration of US$500 million (approximately CA$620 million)
representing 9.4x the Select Assets’ 2022 expected pre-IFRS16
adjusted EBITDA post-synergies.
Strategic Highlights
- In alignment with its strategic plan, Stantec is selectively
acquiring the most strategically complementary assets of Cardno.
- Cardno’s Latin American operations and International
Development business are excluded from the Acquisition.
- Combined Environmental Services business to represent 20% of
Stantec’s pro forma net revenues.
- Augments Stantec’s position as a leader in sustainability,
growing its US Environmental Services practice by more than 60% and
increasing its exposure to the $9 trillion in spending on ecosystem
restoration that the United Nations forecasts by 2030.
- Combined Infrastructure business to represent 30% of Stantec’s
pro forma net revenues.
- Bolsters Stantec’s position to benefit from global stimulus
spending in key geographies.
- Adds approximately 2,750 professionals in regions and sectors
that align with Stantec’s growth objectives.
- Nearly doubles Stantec’s Australia footprint to 2,500 employees
and establishes the critical mass and diversity to further
accelerate growth in this region.
- Meaningfully increases United States footprint to 10,500
employees.
- Complementary blue-chip clients enhance presence and growth
prospects in local and federal government programs, infrastructure
services, urban development, and other growing areas.
- Expands growth platforms in government services and health
sciences with significant cross-selling opportunities.
- Strong cultural alignment with complementary vision, values,
and entrepreneurial mindset.
Financial Highlights
- Aggregate cash consideration of US$500 million (approximately
CA$620 million) representing 9.4x the Select Assets’ 2022 expected
pre-IFRS 16 adjusted EBITDA post-synergies.
- Immediate double-digit accretion to adjusted earnings per share
(pre-synergies).
- 2022 expected net revenue of more than US$350 million
(approximately CA$430 million).
- US$10 million in annual cost synergies expected to be achieved
within two years (approximately CA$12 million).
- Select Assets’ 2022 expected adjusted EBITDA margin in line
with Stantec’s margin profile.
- Acquisition to be funded with existing funds and credit
facilities and expected to result in an estimated 1.5x pro forma
net debt to adjusted EBITDA ratio upon closing, well within
Stantec’s target leverage range of 1.0x to 2.0x.
- The acquisition is expected to close by the end of 2021.
“Stantec’s global leadership in sustainability will be further
augmented by the passion and entrepreneurism of Cardno’s
professionals who, like us, work at the intersection between
clients, science, and innovation to solve the ever-evolving
challenges confronting communities around the world,” said Gord
Johnston, President and Chief Executive Officer. “We have worked
closely with Cardno for many years. Cardno Group CEO, Susan
Reisbord and her team have done a remarkable job in transforming
their organization and returning Cardno to a strong growth path.
The timing couldn’t be better to welcome their team to Stantec and
grow together. Cardno’s key strengths in ecosystem restoration,
health sciences, infrastructure, water, and government services are
completely complementary to Stantec’s offerings in these growing
sectors of the United States and Australia. Together, we will
continue to set the standard for sustainable design and climate
change mitigation.”
Susan Reisbord, Group CEO of Cardno added, “Joining Stantec
offers a tremendous opportunity to the people of both companies to
accelerate our combined growth given how complementary our
strengths are in the regions we operate. Our combined Australian
operations will strengthen our position as a top tier engineering
and design firm there, and this will open new opportunities for us.
As this process has played out, the one thing that has been
striking is the commonality between our values and cultures.”
Acquisition Conditions
Completion of the Acquisition remains subject to Cardno
shareholders’ voting in favor of the Acquisition, Cardno having
completed a pre-sale restructure to transfer the International
Development business outside of the Select Assets, all waiting
periods to consummate the Acquisition under the Hart-Scott-Rodino
Act having expired or been terminated, and Defense
Counterintelligence and Security Agency of the U.S. Department of
Defense having approved the Acquisition for the purposes of
applicable foreign investment laws in the United States.
Financial and Legal Advisors
National Bank Financial Inc. is acting as sole financial advisor
to Stantec on the Acquisition. Legal advice is being provided to
Stantec by DLA Piper.
Webcast & Conference Call
Stantec will host a live webcast and conference call on October
21, 2021, at 7:00 AM Mountain Time (9:00 AM Eastern Time) to
discuss the Acquisition. The webcast and slide presentation can be
accessed at the following link:
https://edge.media-server.com/mmc/p/vzgbk95z
Participants wishing to listen to the call via telephone may
dial in toll-free at 1-855-639-2363 (Canada and United States) or
+1-409-216-0845 (international). Please provide confirmation code
4958938 when prompted.
The conference call and slideshow presentation will be broadcast
live and archived in their entirety in the Investors section of
stantec.com.
Forward Looking Statements
Certain statements contained in this news release constitute
forward-looking statements within the meaning of applicable
securities laws. Any such statements represent the views of
management only as of the date hereof and are presented for the
purpose of providing Stantec’s shareholders and potential investors
with information regarding Stantec, including management’s
expectations with respect to the Acquisition and management’s
assessment of Stantec’s future plans and financial outlook
following the Acquisition. Forward-looking information in this news
release includes, but is not limited to, statements regarding: the
planned Acquisition, including 2022 expected net revenue, the
expected closings thereof, plans regarding financing the
Acquisition, including but not limited to, expected leverage
ratios; expectations or projections about strategies and goals for
growth and expansion; expectations regarding realization of
synergies following the Acquisition, and the timing thereof.
These forward-looking statements reflect management’s
belief and assumptions based on information available at the time
the information was stated and is not a guarantee of future
performance.
Key assumptions on which forward-looking information is based
include, but are not limited to, assumptions about: acquisitions
and divestitures; regulatory decisions and outcomes; timing and
completion of the Acquisition, including receipt of regulatory and
Cardno shareholder approval; and the realization of the anticipated
benefits and synergies of the Acquisition to the combined company,
including impacts on growth in various financial metrics. The
forward-looking events and circumstances discussed in this news
release may not occur and could differ materially from current
expectations as a result of known and unknown risk factors and
uncertainties affecting Stantec, including: regulatory decisions
and outcomes; uncertainty regarding the length of time to complete
the Acquisition; uncertainty regarding the Company’s ability to
achieve the cost savings, synergies and benefits anticipated from
the Acquisition; economic conditions in North America, Australia
and globally; and, many other factors beyond the control of
Stantec. Readers of this news release are cautioned not to place
undue reliance on Stantec’s forward-looking statements, and not to
use future-oriented information or financial outlooks for anything
other than their intended purpose. Stantec does not undertake to
update or revise any forward-looking statements contained in this
news release or otherwise, whether as a result of new information,
future events or otherwise, except as may be required by law.
Non-IFRS Measures
While Stantec reports its financial results in accordance with
IFRS, the following non-IFRS measures are used in this news
release: net revenue; adjusted EBITDA, and net debt to adjusted
EBITDA ratio. Additional details for these non-IFRS measures can be
found in Stantec’s 2020 Annual Report in the Critical Accounting
Estimates, Developments, and Measures section, which is available
on SEDAR at www.sedar.com and at www.stantec.com.
The following non-IFRS measures are also used and defined as
follows: “2022 expected net revenue” is defined as the expected
revenues of Cardno’s Select Assets for the calendar year of 2022,
“Accretion” or “accretive” is defined as the expected change in
adjusted net earnings per share after giving effect to the
Acquisition and any Acquisition related adjustments. “Pre-IFRS 16
adjusted EBITDA” means the adjusted EBITDA of Cardno minus lease
payments as included in the cash flow statements. “2022 expected
pre-IFRS 16 adjusted EBITDA post-synergies” means Pre-IFRS 16
adjusted EBITDA that is expected for the calendar year of 2022 plus
the US$10 million in anticipated annualized cost synergies. “Pro
forma adjusted EBITDA” means the aggregate adjusted EBITDA of
Stantec and Cardno. “Pro forma net debt” means net debt after
giving effect to the Acquisition and any Acquisition related
adjustments. “Pro forma net debt to adjusted EBITDA ratio” is
calculated using pro forma net debt to the pro forma adjusted
EBITDA. “Pro forma adjusted EBITDA margin” is defined as the
aggregate adjusted EBITDA of Stantec and Cardno expressed as a
percentage of pro forma net revenues after giving effect to the
Acquisition and any Acquisition related adjustments.
The non-IFRS financial measures used in this news release do not
have a standardized meaning as prescribed by IFRS. Stantec’s
management believes that these non-IFRS measures provide useful
information to investors and analysts for analyzing the
transaction. These non-IFRS measures are not recognized under IFRS
and may differ from similarly-named measures as reported by other
issuers, and accordingly may not be comparable. These measures
should not be viewed as a substitute for the related financial
information prepared in accordance with IFRS.
About Stantec
Communities are fundamental. Whether around the corner or across
the globe, they provide a foundation, a sense of place and of
belonging. That’s why at Stantec, we always design with community
in mind. We care about the communities we serve — because
they’re our communities too. This allows us to assess what’s needed
and connect our expertise, to appreciate nuances and envision
what’s never been considered, to bring together diverse
perspectives so we can collaborate toward a shared success. We’re
designers, engineers, scientists, and project managers, innovating
together at the intersection of community, creativity, and client
relationships. Balancing these priorities results in projects that
advance the quality of life in communities across the globe.
Stantec trades on the TSX and the NYSE under the symbol STN.
Visit us at stantec.com or find us on social media.
About Cardno
Cardno is a professional infrastructure and environmental
services company, with specialist expertise in the development and
improvement of physical and social infrastructure for communities
around the world. Cardno’s team includes leading professionals who
plan, design, manage and deliver sustainable projects and community
programs. Cardno is an international company, listed on the
Australian Securities Exchange (ASX: CDD). www.cardno.com
Investor Contact |
Media
Contact |
Tom McMillan |
Danny Craig |
Stantec Investor Relations |
Director, Public Relations |
Ph (780) 917-8159 |
Ph: (214) 473-2425 |
tom.mcmillan@stantec.com |
danny.craig@stantec.com |
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