SNC plunges after federal prosecutors decline deal

MONTREAL • SNC-Lavalin Group Inc. shares plunged to their lowest close since early 2016 on Wednesday after the company revealed that federal prosecutors won’t negotiate a deal that could reduce the time SNC spends in court fighting fraud and corruption charges laid against it in 2015 following an investigation of activities by some of its former employees.

Shares of the Montrealbased engineering and construction company fell nearly 14 per cent after the prosecutors’ decision was announced, closing at $44.86. That’s the lowest close since March 2, 2016.

The drop came after federal prosecutors declined to “invite” the company to negotiate a remediation agreement, also known as a deferred prosecution agreement or reparation agreement, using a new provision of the criminal code.

“The criminal code defines the criteria for reparations agreements; the (prosecutor’s office) determined

DETERMINED THAT THE CRITERIA WERE NOT MET.

that the criteria were not met,” the Public Prosecution Service of Canada said in a brief email.

Chief executive Neil Bruce said the decision will probably result in three or four more years of court battles as the company defends itself.

“We truly believe we’re not guilty,” Bruce said in an interview.

In the meantime, Bruce acknowledged the uncertainty weighs heavily on its investors and its 50,000 current employees, who he described as innocent people who have been trying to rebuild the company.

“Financial markets, you know, don’t like uncertainty. You can see the damage that this has caused to the company and to the market capitalization and share price today.”

Canaccord Genuity analyst Yuri Lynk wrote that he was surprised that the prosecutors hadn’t agreed to negotiate and lowered his price target for SNC shares to $61 from $73.

Lynk wrote that he doesn’t think it’s likely SNC-Lavalin will be barred from doing business with the federal government, in part because the company has a good defence case and because “it is unlikely the government would allow a company employing thousands of people in Canada to fail because of the transgressions of a handful of people.”

The RCMP charged the firm, its construction division and a subsidiary with one charge each of fraud and corruption for allegedly defrauding Libyan organizations of roughly $130 million.