WSP to acquire RPS further accelerating the execution of its 2022-2024 global strategic action plan

WSP Global Inc. (TSX:WSP) (“WSP” or the “Corporation”) is pleased to note that earlier today it announced that it has reached an agreement with RPS Group plc (“RPS”) on the terms of a cash acquisition pursuant to which a wholly-owned subsidiary of WSP will acquire the entire issued and to be issued share capital of RPS for £2.06 per share in cash (the “Acquisition”).

Founded in 1970 and built on a legacy of environmental and social engagement, RPS is a diversified and well-recognized global professional services firm of approximately 5,000 talented employees. As an established technology-enabled consultancy that operates across a range of sectors, RPS provides specialist services to government and private sector clients with a focus on front-end consulting. RPS has been widely recognized for its strong sustainability agenda, having been ranked number one in the UK for climate change and energy consulting by the Environment Analysis for 2019/2020, a top 200 environmental firm by Engineering News-Record in 2021 and recognized in 2021 as one of the first “carbon champions” by the Institution of Civil Engineers.

“We are pleased to announce the proposed acquisition of RPS as it will enable us to rapidly deliver on our Global Strategic Action Plan and create value for all our stakeholders,” commented Alexandre L’Heureux, President and Chief Executive Officer of WSP. “RPS is a perfect fit as it adds depth to our current platform and is highly complementary, in terms of geographies and sectors, to our recently announced agreement to acquire the Environmental and Infrastructure (E&I) business (the “Wood E&I Business”) of the John Wood Group plc (the “Wood Acquisition” and together with the Acquisition, the “Pending Acquisitions”). When completed, our recently announced transactions will bring our workforce to approximately 70,000, with approximately 23,000 environmental experts across the globe. We are proud that we are building a strong ESG leader with significant capabilities in water and energy and contributing significantly towards the transition to a greener and low-carbon world,” he added.

FINANCIAL HIGHLIGHTS

• Acquisition of RPS reflects an enterprise value of approximately £625 million (approximately $975 million), representing approximately 14.9x RPS’s pre-IFRS 16 adjusted EBITDA¹ for the twelve months ended June 30, 2022 (“LTM”) or 10.1x once the full benefit of expected synergies is taken into account^3,5,11. RPS’s LTM Adjusted EBITDA¹ was £52.9 million (LTM Adjusted operating profit/(loss)10 of £33.7 million).
• Under UK regulations, we have been constrained from publishing forward-looking valuation multiples in the absence of a Reporting Accountant’s report to support such a statement. However, we note the trading update published on June 24, 2022 by RPS which confirmed that following the strong performance in the first half of 2022 and the growing contracted order book, RPS expected the momentum to continue in the second half of 2022.
• Expected to be immediately accretive^1,3 to WSP’s adjusted net earnings² before synergies. Expected mid to high teen accretion^1,3 to adjusted net earnings per share^1,2 when also giving effect to the Wood Acquisition and synergies are fully realized^3,5.
• Anticipated cost synergies of approximately £20 million (approximately $30 million) expected to be realized over a 24-month period, with 50% to be realized within the first twelve months after the closing date. Costs required to realize such cost synergies estimated at approximately £20 million (approximately $30 million) in the aggregate³.
• Concurrently with the announcement of the Acquisition, WSP has secured a new fully committed “certain funds” £600 million (approximately $935 million) credit facility (the “New Credit Facility”), which includes commitments for the full amount of the purchase price for the Acquisition.
• WSP also announced a $400 million public bought deal and concurrent $400 million private placement equity financing, from three existing institutional shareholders of WSP. WSP intends to use the net proceeds of the equity financing to fund in part the purchase price payable in respect of the Acquisition (and related costs and expenses) and accordingly reduce amounts to be advanced, or repay amounts advanced, under the New Credit Facility to fund the purchase price for the Acquisition.
• WSP expects its pro forma net debt to adjusted EBITDA ratio^1,12 to be approximately 1.9x^3,4 upon closing of the Acquisition, in accordance with WSP’s objective to maintain net debt to adjusted EBITDA^1,2,3,4 between 1.0x and 2.0x and significant financial flexibility assuming completion of the equity financing as well as completion of the Wood Acquisition. WSP 2021 Adjusted EBITDA¹ and 2021 Earnings before net financing expense and income taxes were $1,322.5 million and $724.6 million, respectively. WSP’s Net debt to adjusted EBITDA ratio¹ was 0.8x on July 2, 2022.
• The Acquisition is expected to be completed by the end of the fourth quarter of 2022³.

For further details regarding this announcement, readers are referred to the firm offer announcement in respect of the Acquisition (the “Announcement”) previously released in the United Kingdom on the date hereof in accordance with Rule 2.7 of the UK City Code on Takeovers and Mergers and which can be found on WSP’s website at www.wsp.com/investors. This news release should be read in conjunction with, and is subject to, the full text of the Announcement.

CONDITIONS TO THE ACQUISITION AND TIMETABLE

It is intended that the Acquisition will be implemented by means of a Court-sanctioned scheme of arrangement (the “Scheme”) under Part 26 of the U.K. Companies Act 2006. The purpose of the Scheme is to provide for WSP to indirectly become the owner of the entire issued and to be issued share capital of RPS.

Details of the proposed Acquisition will be sent to RPS shareholders within 28 days of the date of this announcement (unless the Panel on Takeovers and Mergers under the U.K. City Code on Takeovers and Mergers agrees otherwise). Subject, amongst other things, to the satisfaction or waiver of the conditions, the approval of the Scheme by the RPS shareholders, the receipt of applicable regulatory approvals and the Court’s sanction of the scheme of arrangement, it is expected that the Acquisition will be completed by the end of the fourth quarter of 2022.

All relevant documentation will be made available on WSP’s website at www.wsp.com/investors.

ACQUISITION FINANCING

Equity Financing

The equity financing comprises:

• approximately $400 million bought deal public offering (the “Offering”) of common shares (“Common Shares”) of the Corporation (the “Offering Common Shares”) at a price of $151.75 per share (the “Offer Price”); and
• approximately $400 million private placements (the “Concurrent Private Placement”) of Common Shares (the “Placement Common Shares”) at the Offer Price to three existing shareholders, (i) GIC Pte. Ltd or one of its affiliates (“GIC”), (ii) Caisse de dépôt et placement du Québec (“CDPQ”), and (iii) a subsidiary of Canada Pension Plan Investment Board (“CPP Investments” and collectively with GIC and CDPQ, the “Investors”).

WSP intends to use the net proceeds from the equity financing to fund in part the purchase price payable in respect of the Acquisition (and related costs and expenses) as a means of re-balancing the Corporation’s capital structure and accordingly reduce amounts to be advanced, or repay amounts advanced, under the New Credit Facility to fund the purchase price for the Acquisition.

Public Offering of Common Shares on a Bought Deal Basis

In connection with the offer for RPS, WSP has entered into an agreement with CIBC Capital Markets, National Bank Financial and RBC Capital Markets, acting as joint bookrunners, on behalf of a syndicate of underwriters (collectively, the “Underwriters”), pursuant to which the Corporation will issue from treasury, and the Underwriters shall purchase on a “bought deal” basis, 2,636,000 Offering Common Shares at the Offer Price for gross proceeds to the Corporation of approximately $400 million.

In addition, the Underwriters have been granted an over-allotment option (the “Over-Allotment Option”), exercisable in whole or in part on the same terms as the Offering for a period of 30 days from the closing of the Offering, to issue additional Offering Common Shares, representing up to 15% of the size of the Offering, for additional gross proceeds of up to $60 million.

The Offering Common Shares to be issued pursuant to the Offering and Over-Allotment Option will be offered in all provinces and territories of Canada by way of a prospectus supplement to the short form base shelf prospectus of the Corporation dated July 7, 2022 (collectively, the “Shelf Prospectus”). The Offering Common Shares will also be offered in the United States by way of private placement to “qualified institutional buyers” in reliance upon the exemption from registration provided by Rule 144A under the U.S. Securities Act of 1933 (the “U.S. Securities Act”).

The issuance of the Offering Common Shares is subject to customary approvals of applicable securities regulatory authorities, including the Toronto Stock Exchange (the “TSX”). Closing of the Offering and the Concurrent Private Placement are expected to occur concurrently on or about August 16, 2022. The Offering is conditional upon the concurrent completion of the Concurrent Private Placement. 

No securities regulatory authority has either approved or disapproved the contents of this press release. The Offering Common Shares have not been, and will not be, registered under the U.S. Securities Act, or any state securities laws. Accordingly, the Offering Common Shares may not be offered or sold within the United States unless registered under the U.S. Securities Act and applicable state securities laws or pursuant to exemptions from the registration requirements of the U.S. Securities Act and applicable state securities laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Offering Common Shares in any jurisdiction in which such offer, solicitation or sale would be unlawful.

Concurrent Private Placements of Common Shares

Concurrently with the announcement of the Offering, WSP has also entered into subscription agreements under which the Corporation will complete the Concurrent Private Placement at the Offer Price with (i) GIC for aggregate gross proceeds to the Corporation of approximately $200 million, (ii) CDPQ for aggregate gross proceeds to the Corporation of approximately $150 million, and (iii) CPP Investments for aggregate gross proceeds to the Corporation of approximately $50 million.

Each of the Investors has also been granted an option (the “Additional Subscription Option”) to purchase a number of additional Placement Common Shares representing up to 15% of the number of shares subscribed by each of them on closing, subject to, and in the same proportion as, the Over-Allotment Option being exercised by the Underwriters.

The issuance of the Placement Common Shares under the Concurrent Private Placement is subject to the approval of the TSX. Closing of the Concurrent Private Placement is scheduled to occur concurrently with the closing of the Offering and is conditional on the concurrent completion of the Offering. 

Assuming completion of the Concurrent Private Placement and the Offering and the issuance of the Placement Common Shares and Offering Common Shares, but not the exercise of the Over-Allotment Option or the Additional Subscription Option, CDPQ will beneficially own, or exercise control or direction over, directly or indirectly, an aggregate of 22,335,372 Common Shares representing approximately 18.1% of the issued and outstanding Common Shares. Under the same assumptions, CPP Investments will beneficially own, or exercise control or direction over, directly or indirectly, an aggregate of 18,217,889 Common Shares representing approximately 14.8% of the issued and outstanding Common Shares. 

All Common Shares issued pursuant to the Concurrent Private Placement will be subject to a statutory hold period. In accordance with the terms of the Subscription Agreements, all Common Shares issued pursuant to the Concurrent Private Placement will also be subject to contractual lockups for a period of six (6) months following closing of the Concurrent Private Placement. 

Moreover, each of the Investors have undertaken for a 12-month period following closing to have all of the Placement Common Shares (and the additional Placement Common Shares subscribed pursuant to the Additional Subscription Option, as applicable), participate in the Corporation's dividend reinvestment plan (the “DRIP”) and to have such shares enrolled in the DRIP for all dividends.

Upon the closing of the Concurrent Private Placement and any exercise of the Additional Subscription Option, each of the Investors (or their designee) will be entitled to a capital commitment fee equal to 4% of the aggregate purchase price for the Placement Common Shares for which each of them has subscribed (and the additional Placement Common Shares each of them has subscribed pursuant to the Additional Subscription Option, as applicable).

New Credit Facility

Concurrently with the announcement of the Acquisition, WSP has obtained a “certain funds” £600 million (approximately $935 million) New Credit Facility, which includes commitments for the full amount of the purchase price for the Acquisition. Canadian Imperial Bank of Commerce and HSBC are acting as co-lead arrangers and joint bookrunners with respect to the New Credit Facility. 

The New Credit Facility is designed to ensure compliance with the “certain funds” requirements from announcement of the Acquisition under the UK City Code on Takeovers and Mergers. Further, the Acquisition financing plan has been designed and structured with a view to preserving WSP’s investment grade profile.

The New Credit Facility contains representations, warranties, conditions precedent, covenants, a leverage ratio and events of default that are customary for a transaction of this nature.

APPROVALS AND RECOMMENDATION

The board of directors of RPS intends to recommend unanimously the Acquisition. 

WSP has also received undertakings from each of the RPS directors and other RPS major shareholders to vote for the transaction at the RPS shareholder meetings to be convened in connection with the Scheme, in respect of a total number of RPS shares representing in the aggregate approximately 18% of the existing issued share capital of RPS on August 8, 2022.

FINANCIAL AND LEGAL ADVISORS

HSBC is acting as financial advisor to WSP on the Acquisition. Legal advice is being provided to WSP by Linklaters LLP in the United Kingdom and Stikeman Elliott LLP in Canada.

Read the official press release

All dollar figures in this press release are Canadian dollars unless otherwise indicated. Where financial information of RPS or relating to the Wood E&I Business has been converted from British pounds sterling or U.S. dollars, as applicable, to Canadian dollars for purposes of comparison to and combination with, financial information of WSP, (i) British pounds sterling have been converted to Canadian dollars at an exchange rate of $1.56 Canadian dollars per £1.00, and (ii) U.S. dollars have been converted to Canadian dollars at an exchange rate of $1.29 Canadian dollars per US$1.00. 

1 Non-IFRS and other financial measures. Please refer to the “non-IFRS and other financial measures” disclaimer above. 

2 Non-IFRS and other financial measures. These measures are defined in section 19, “Glossary of segment reporting measures, non-IFRS and other financial measures” of the Q2 MD&A. Please refer to "non-IFRS and other financial measures" disclaimer above. 

3 This information constitutes forward-looking information, based on multiple estimates and assumptions about future events. The reader is cautioned that using this information for other purposes may be inappropriate. Actual results may differ and such differences may be material. Please refer to the “forward-looking statements” disclaimer above.

4 The estimated future financial information of the Acquired Businesses and the pro forma financial information included in this news release have been prepared by WSP and derived from the publicly available consolidated financial statements for the year ended December 31, 2021 and unaudited consolidated financial statements for the six-month period ended June 30, 2022 of RPS or Wood, as applicable, and reflect certain significant assumptions, judgments and allocations made by WSP. Such financial information reflects assumptions and adjustments that are based upon preliminary estimates, which may be revised as additional information becomes available and as additional analyses are performed. Accordingly, the final accounting adjustments may differ materially from the adjustments reflected therein. Pending completion of the Wood Acquisition, the Wood E&I Business is a fully integrated business unit of Wood, and separate financial statements historically have not been prepared for the Wood E&I Business.

5 Expected to be realized over a 24-month period, with 50% to be realized within the first twelve months after the closing date. Cost to realize synergies estimated at ~£20 million (~$30 million). Prior to the date of this announcement, consistent with market practice, WSP has been granted limited access to targeted information and RPS’s senior management for the purposes of confirmatory due diligence. As a result, its preliminary assessment of potential synergy opportunities for the Acquisition is primarily based on its own outside-in perspectives, previous acquisition experience and publicly available information.

6 Management's estimate based on the number of employees on a proforma basis for the year ended December 31, 2021 including the Wood Acquisition and the recently announced pending acquisitions by WSP of Capita Real Estate and Infrastructure Ltd and GL Hearn Ltd. based on the number of employees for wholly-owned subsidiaries. Source: UK House of Companies, Australia Workforce Gender Equality Agency and information provided by Wood, RPS, Capita Real Estate and Infrastructure Ltd and GL Hearn Ltd.

7 Based on WSP's estimates derived from the publicly available consolidated financial statements of RPS for the year ended December 31, 2021 and unaudited consolidated financial statements for the six-month period ended June 30, 2022.

8 These measures are, or are derived from, components of revenue as calculated in accordance with the accounting policies used to prepare the revenue figure presented in financial statements of WSP, Wood and RPS, as applicable, under IFRS for the year ended December 31, 2021. WSP does not intend to disclose these measures on a periodic basis.

9 Based on 2021 net revenues for each of WSP, the Wood E&I Business and RPS and derived from the publicly available consolidated financial statements of WSP, Wood and RPS, in each case for the financial year ended December 31, 2021, and reflecting certain significant assumptions, judgements and allocations made by WSP. 

10 This definition is consistent with “Adjusted operating profit” as defined by RPS in its consolidated financial statements for the year ended December 31, 2021 and unaudited consolidated financial statements for the six-month period ended June 30, 2022, and as presented in its consolidated income statement.

11 Based on the LTM pre-IFRS 16 EBITDA of £41.9 million and derived from the consolidated financial statements of RPS for the year ended December 31, 2021 and for the six-month period ended June 30, 2022.

12 Assumes results from Golder Acquisition completed on April 7, 2021 are annualized.