Following the announcement of WSP’s intended acquisition of RPS (EA 09-Aug-22), another consulting engineering major Tetra Tech has announced that it has reached an agreement with RPS Group on the terms of an all-cash acquisition.
In August, the board of global environmental consultancy and professional services firm WSP said it had agreed with the board of RPS to acquire the UK-headquartered multidisciplinary consultancy for £625m (US$760m), equivalent to approximately 14.9x RPS’s adjusted EBITDA for the twelve months ended June 30, 2022.
Environment Analyst reported that according to our latest UK E&S Consulting Market Assessment, the addition of RPS along with WSP's other recent British-based buys (Capita Real Estate & Infrastructure and Wood Environment & Infrastructure) would more than double WSP’s UK sector revenue to around £250m, making it the UK market leader. It would also help propel WSP to the number-one position in the global market by environmental & sustainability consulting revenue, with the combined entities boasting a 23,000-strong E&S professional contingent worldwide.
At the time, the chairman of RPS Ken Lever described the offer from WSP as compelling and one "which fully values the business and its future prospects".
It represented a highly attractive premium to recent trading levels and provides certain value in cash today for RPS shareholders, he said, with the directors believing that the acquisition would provide career opportunities for the company’s 5,000 employees within the enlarged WSP Group, "as well as access to a comprehensive and expanded service offering for our clients".
The transaction remained subject to an RPS shareholder vote and other customary regulatory approvals. And all seemed to be progressing in the right direction for Montreal-headquartered WSP to seal the deal by the end of the year.
Tetra Tech bid
Until this past week, when WSP's US-headquartered environmental, engineering and consulting rival Tetra Tech claimed that it had also reached an agreement with RPS Group on the terms of an all-cash acquisition for 222 pence per share, totalling £636m (US$773m) - £11m higher than the WSP bid. And that this acquisition had also been unanimously recommended by the board of directors of RPS Group.
The announcement from Tetra Tech UK Holdings Limited (a wholly owned subsidiary of Tetra Tech Inc), stated: "The combined 26,000 associates of the RPS Group and Tetra Tech will establish a premier global consultancy in water, environment, sustainable infrastructure, and energy transformation," and would, "significantly expand Tetra Tech’s water practice in the United Kingdom". According to Environment Analyst’s proprietary industry data, this combination would rank as the number-two E&S consulting services firm in the UK and number-three worldwide.
Ken Lever said of the offer from Tetra Tech: "The board of RPS is pleased to recommend Tetra Tech’s offer, which provides our shareholders with even greater value for their shares."
RPS said it intends "to take the relevant actions to implement the acquisition" by Tetra Tech and confirmed that the directors have subsequently withdrawn their recommendation of the WSP offer and postponed the WSP offer shareholder meetings. RPS’s financial advisors pertaining to its sale include Gleacher Shacklock and AEC Advisors.
Tetra Tech said it had obtained "certain funds" amounting to £714m ($800m) plus a $350m new credit facility, which includes commitments for the full amount of the purchase price of RPS. Bank of America is acting as administrative agent and sole lender with respect to the new credit facility.
Next move for WSP?
WSP issued a statement in response to the Tetra Tech offer, stating that the company is now "considering its options" in respect of RPS and a further announcement will be made by WSP in due course.
As one of the UK's first commercial environmental planning practices, RPS has a long-standing track record in the industry. The firm now works across six major sectors: property, energy, transport, water, resources, and defence & government services. Its services span: project and programme management; design & development; water services; environment; advisory and management consulting; exploration & development; planning & approvals; health, safety and risk; oceans and coastal; laboratories; training, communication and creative services.
With professionals operating in 125 countries across six continents, RPS generated profitable net fee revenue of £476m ($628m) during the twelve months ending December 2021, having slipped temporarily into the red during the prior COVID-constrained year (EA 21-Mar-2022).