Opus shares rise to three-month high after buying Canadian business Stewart Weir

Wednesday 4th September 2013

Shares in Opus International Consultants rose to a three-month high after the engineering consultancy agreed to pay as much as C$90 million for engineering and environmental advisers Stewart Weir, propelling its Canadian business to its second-largest unit by revenue.

Opus shares gained 4.8 percent to $1.76 after the company said it will pay an initial C$50 million for Stewart Weir, with the potential for a further C$40 million in integration and performance-based payments over three years.

Opus, which last month posted a 13 percent decline in first-half earnings because of a weaker performance from its New Zealand unit, is looking to diversify in existing markets and expand into new markets to grow profits. The company, which began its Canadian operation in 2002, sees the purchase of Stewart Weir as enabling it to expand into pipeline, infrastructure and energy related projects.

"In addition to our entry into the oil and gas sector, the Canadian federal government has highlighted infrastructure as one of its top priorities for the future," Opus managing director David Prentice said in the statement. "Acquiring Stewart Weir is strategically important given their market strength and growth prospects both in Canada generally and in the oil and gas sector."

The acquisition gives Opus critical mass to compete for larger projects and establishes a presence in Alberta, Canada's top growth region.

Established in 1912, Edmonton-based Stewart Weir had normalised earnings before interest and tax of C$9 million in the year ended Jan. 31 on revenue of C$91 million, according to Opus presentation notes.

Last month, Opus said its existing Canadian business lifted sales 6.5 percent to $11.5 million and EBIT rose 51 percent to $780,000. By contrast, the company's New Zealand revenue was $141 million, followed by Australia at $40 million and the UK at $19 million.

The potential payment for Stewart Weir is the equivalent of between 4.8 times and 7 times historical ebitda, and will be paid for with available cash and existing debt facilities, Opus said.

The acquisition of the employee owned company will add 550 staff to the company's Canadian unit, boosting total Canadian staff to about 700, Opus said.

Stewart Weir chief executive Brian Pearse will remain with the company as president.

BusinessDesk.co.nz

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