Arcadis to buy EC Harris

City A.M. Reporter
Dutch engineering firm Arcadis said it would acquire London-based buildings and infrastructure consultant EC Harris to strengthen its position in project management and expand its presence in the Middle East and Asia.

The company, which also cut its outlook for 2011 earnings, has been looking for opportunities away from the struggling Benelux market, looking to tap strong growth in Asia and South America.

"Although an acquisition in the UK was not on top of our expectations list, EC Harris adds decent size and an attractive position in the Middle East and Asia," SNS Securities analysts wrote in a note.

Arcadis, which competes with Dutch peer Grontmij and US rival Tetra Tech, said it would issue three million shares to EC Harris partners and pay an undisclosed cash amount from existing credit facilities.

SNS Securities analysts estimated the acquisition price to be between €108m and €144n (£94m and £126m).

Arcadis Chief Executive Harrie Noy said the deal would make his company a top-five firm globally in project management and would allow it to win new business higher up the construction value chain.

"One of the advantages of having a position in the UK is that many multinationals have a strong base there and it is very difficult to imagine that you can serve them across the globe without having a strong base in the UK," Noy said.

EC Harris, which made €290m in gross revenue last year, expects to make 44 per cent of its sales this year in the property market and 57 per cent in Britain. Arcadis made 19 per cent of its 2 billion euros gross revenue last year in the buildings market.

EC Harris, which boasts Royal Dutch Shell, HSBC and Heathrow Airport owner BAA among its clients, has undertaken projects globally such as the 55,000-seat Singapore Sports Hub and the Doha Festival City shopping mall.

The deal, which Arcadis said would be accretive to earnings per share as of 2012, is expected to receive approval by EC Harris partners at the end of October and close in November.

In a trading update accompanying the announcement of the deal, Arcadis warned that 2011 net income from operations was expected to come in at the same level as 2010. It had previously guided for growth of between 0 and five per cent.