SNC-Lavalin’s resources president Neil Bruce tells Michael Bow how he helped engineer the Canadian firm’s biggest-ever takeover
The Canadian giant acquiring UK group Kentz Corporation is set to save C$30m (£27.5m) in a single stroke by de-listing the FTSE 250 listed group from the London Stock Exchange.
SNC-Lavalin, which is on the verge of clinching a £1.2bn takeover of Kentz, said 60 per cent of a $50m cost saving will be made within the next few weeks by removing Kentz’s London listing.
“All the costs associated with not being a listed company anymore and not having all the advisers will give us 60 per cent of the cost savings,” Neil Bruce told City A.M. over the phone from Calgary, Canada. “The other 40 per cent will come from merging locations. There’s a great opportunity to optimise offices,”
SNC-Lavalin and Kentz’s offices in Houston, Abu Dhabi, Saudi Arabia and Australia will be merged but a slew of job losses is unlikely.
“We really need good people. A few more people are doing corporate type roles for Kentz and we think we’ve got opportunities for them to come into the corporate side of SNC. There’s opportunities for everybody,” he said.
The deal to acquire Kentz brings to fruition a year-long push by Bruce, a former Amec executive, to turn the Canadian group into a major player in the oil and gas sector.
Fast forward 12 months and he has arguably delivered on his promise. The takeover – which still need to be approved by shareholders – will merge SNC’s 4,000 oil and gas workers with Kentz’s 14,500 staff. Kentz boss Christian Brown will oversee the new division but Bruce will sat atop the operation – making him a powerful new player in the oil and gas world.
“This company is a sleeping giant,” he said, fresh from a 6am call with shareholders. “It’s got a great balance sheet and we put together a strategy in May last year setting out a five year ambition to be a top Tier 1 company.”
“We believe that you need to have a large portfolio in order to compete. That was probably the hardest piece of the strategy to deliver. The oil and gas sector is continuing to consolidate so the ability to do something significant in the area is pretty difficult.”
SNC-Lavalin, which is led by chief Bob Card, began mulling a takeover of Kentz soon after British engineering company Amec launched a failed takeover bid for Kentz last August.
Although Kentz was one of four candidates under consideration, its balance sheet and areas of expertise soon made it frontrunner for an SNC move. Bankers from RBC were appointed and Bruce made his move. “I know Christian Brown and I’ve known the chairman for about four years. We arranged a meeting with myself and Bob Card to meet with them in London. We had discussions and made the initial offer,” he said.
“I think the fact they’d been through this process the previous August meant they’d gone away and done some internal housekeeping. The fact that they did all of that helped our conversation.”
Bruce said an initial offer was rejected but a small increase got the deal over the line. Bruce has done about a dozen M&A deals over his career but he said this one was satisfying due to the speed it was executed.
“I think they’d got to a stage where they’re thinking at some point, whether it’s six months or 12 months or 18 months we are probably going to get integrated into another company so best make sure it’s a company we’d like to integrate into and be part of.”
The price SNC-Lavalin will pay for Kentz has raised eyebrows in some quarters. The 935p a share offer was 61 per cent higher than Amec’s August bid – but Bruce is adamant he has not overpaid. “People say, ‘wow you’re offer was far more than the bid last year’ and you say, ‘yes but Kentz is a completely different company from last August’,” he said. “They’ve made great progress through the first half of 2014 but effectively the numbers out there are actually 2012 numbers. The premium is lower than a couple of acquisitions going through currently.”
Bruce is set to push on with a 100-day plan once the deal goes through in August, barring any hiccups.