WSP Approaches Engineering Firm Aecom About Deal

Ed Hammond

(Bloomberg) -- Canada’s WSP Global Inc. has approached rival engineering services firm Aecom about a possible deal, according to people familiar with the matter.

There’s no guarantee that the overture will lead to a transaction, said the people, who asked to not be identified because the matter isn’t public.

Aecom shares opened up 4% Tuesday, valuing the company at about $7.7 billion. WSP fell 0.4% to C$93.22 apiece in Toronto, giving the company a market value of about C$9.9 billion ($7.6 billion).

Representatives for Los Angeles-based Aecom and Montreal-based WSP didn’t immediately respond to requests for comment.

Aecom, which had been targeted by activist investor Starboard Value last year, agreed in October to sell its management services division to a group of private equity firms for $2.4 billion.

The potential acquisition would give WSP more exposure to the U.S. and could lead to cost savings of about $200 million, Deutsche Bank analyst Chad Dillard wrote in a note to clients Tuesday. Separately, Baird analyst Andrew Witmann said Aecom could be valued in the mid-to-high $50-per-share range in a deal.

Aecom’s services include consulting, planning, architecture, engineering and construction management, according to its website.

While it has a growing backlog thanks to a steady stream of government and infrastructure contracts, profits have stagnated in recent years due to inefficiencies and construction contract losses, according to a Bloomberg Intelligence report in December.

WSP, another large design and engineering services player, has been expanding aggressively through deals. It closed an acquisition in December of Ecology and Environment Inc., a month after announcing that it had purchased Elton Consulting Group Pty Ltd.

(Updates shares in third paragraph; adds analyst notes in sixth.)

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