A shift toward lower-risk sectors

Continued from FP1

The company said it was looking to expand into Europe and Asia, and that it would target the steadier, lower-growth infrastructure and power sectors.

Oil and gas makes up 37 per cent of SNC-Lavalin’s project orders in backlog, and contributes 45 per cent of the company’s revenues.

“I think it’s a step toward being a more diversified company,” Lynk said. “Yes, oil and gas will shrink as a proportion of the pro forma company, but I’m not sure you want 45 per cent of your business in one sector — especially one as volatile as oil and gas.”

SNC-Lavalin had in recent years signalled that it would expand its oil and gas division, which can offer higher margins than other sectors.

In June 2014, months before oil prices collapsed, SNCLavalin purchased oil and gas-focused Kentz Corp. for $2.1 billion in what was then its largest-ever acquisition.

The shift comes after low commodity prices and a weakening global economic outlook put pressure on engineering and construction firms. Last December SNCLavalin announced it would lay off 400 people, most of whom were in its mining division. That followed the cutting of 4,000 positions from its global offices in 2014.

WS Atkins is in a number of sectors including rail, nuclear power, water, defence and security, and major highway construction.

Chris Murray, an analyst with AltaCorp Capital Inc., said SNC-Lavalin CEO Neil Bruce is likely to be very familiar with the company after spending many years in the European market.

“It’s a company that SNC’s senior executive team probably knows very well,” he said.

Shares of WS Atkins popped on Monday following the news, from 1,600 pence per share to over 1,900. The offer of 2,080 pence per share is a 30 per cent premium to WS Atkin’s closing share price last week of 1,540 pence.

According to U.K. law, SNC-Lavalin has until May 1 to make a final decision on the offer.