MONTREAL – In a?province that protects its very own and has a history of giving foreign?buyers?a frosty reception, Quebec’s political will is viewed as a major hurdle?for?any suitor circling SNC-Lavalin Group Inc.
Foreign buyers target SNC-Lavalin Group Inc with takeover ambitions: \’People are circling\’
SNC-Lavalin Group Inc. continues to be approached \”informally\” by a minimum of two large foreign engineering firms that are weighing a possible takeover of the beleaguered Canadian engineering and construction giant, the Financial Post realizes.
“[Quebec economy minister Jacques] Daoust has repeated often over the last few months that SNC-Lavalin is a jewel of Quebec,” said Melissa Turgeon,?press attach for the Quebec Ministry of the Economy, Innovation and Exports, in an email.
Daoust?says the president of SNC-Lavalin assured him that today the Canadian engineering giant isn\’t for sale.
In an e-mail to the Financial Post, Turgeon?said the minister spoke with the president and chief executive officer of SNC-Lavalin, Robert Card, Wednesday morning and was told the company is not currently in takeover talks?with potential buyers.
SNC-Lavalin Group Inc. continues to be approached \”informally\” by a minimum of two large foreign engineering firms that are weighing a possible takeover, according to Financial Post sources acquainted with events at the Montreal-based company.
Shares of SNC rose around 3.75 percent in Toronto hitting an intraday high of $47.25 on Wednesday morning before settling at $46.51.
“I like the idea of any takeover. We want all of our companies to obtain taken over if the price is right,” said David Taylor of?Taylor Asset Management, that is a top-ten SNC shareholder on behalf of its clients.
“People see this one like a company that has struggled, it\’s some good assets, it\’s from favour, the valuation is attractive and it\’s cheap relative to its peers.”
Among the potential buyers considered interested are giant Spanish civil and engineering firm Actividades de Construccion y Servicios S.A. (ACS), whose subsidiaries currently partner with SNC on a number of projects; and Australia\’s WorleyParsons, which has publicly stated it would like to expand its presence in Canada.
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WorleyParsons wasn’t immediately readily available for comment.
ACS isn\’t thinking about SNC-Lavalin, Juan Jose Diaz Clavel, a Madrid-based?spokesman for the company, told Bloomberg.
A first concern for SNC and it is shareholders is the 10-year ban on federal public works contracts the company could face if it\’s convicted of criminal corruption charges laid by the RCMP in February from the firm and 2 of its corporate affiliates.
SNC?executives have said they hope the company will instead have the ability to pay a fine in place of a guilty plea.
Taylor states that a takeover might be one way to avoid that contract ban.
“I\’m not sure you can ever escape the financial penalty, but that 10-year ban, you may be able to elude that with the business in another entity,” he said.
?Daoust has repeated many times over the last few months that SNC-Lavalin is really a jewel of Quebec
The likelihood of a foreign strategic player detaching the entire clients are relatively small, based on Dundee Capital Markets analyst Maxim Sytchev.
He says he doesn\’t believe that local Quebec powers would allow the potential loss of a hq, though having local buyers involved will make the situation more \”politically palatable.\”
\”If there\’s a ‘Quebec Inc.’ solution which is part of their whole takeover plan, that\’s something. But you should not underestimate the political underpinning for the reason that geography,\” he explained.
The province?has been hostile to foreign takeovers previously.
When U.S.-based?Lowe’s Companies Inc. attempted to buy the Rona Inc.?home-improvement retail chain in 2012, the government declared the Quebec company?\”a major strategic asset for Canada.\”
Sytchev?says it\’s more likely that Canadian pension funds would acquire the hard assets while waiting for SNC’s engineering and construction division to stabilize.
Currently, most of SNC\’s largest shareholders are Canadian pension funds and cash managers, led by the Caisse de dp?t et placement with a 12.17 per cent stake.
\”As usual, we never comment on market rumours regarding companies we invest in,\” said Maxime Chagnon, senior director of media relations at the Caisse.
Sytchev says that if there is a takeover for the whole asset base it might need to happen before SNC begins selling its Highway 407 stake over the past quarter of 2015.
“If individuals are looking at the entire portfolio they need to act now, if they are looking at pieces, they can wait,\”?said Sytchev.
With files from Bloomberg News