SNC-Lavalin to acquire Kentz Corporation Limited, a leading oil & gas services company with a global presence

MONTREAL, June 24, 2014 /PRNewswire/ -- SNC-Lavalin Group Inc. (TSX: SNC) (SNC-Lavalin) is pleased to announce that it has reached an agreement with Kentz Corporation Limited (Kentz), approved by the boards of directors of both companies, on the terms of a cash acquisition by which the entire ordinary share capital of Kentz--issued and to be issued--will be acquired by SNC-Lavalin. Kentz is a global oil & gas services company, with 14,500 employees operating in 36 countries who provide engineering, construction and technical support services to clients in the oil & gas sector. The full announcement was issued earlier publicly and may be viewed on SNC-Lavalin's website.

The proposed acquisition of Kentz is fully aligned with SNC-Lavalin's strategy of becoming a global Tier-1 engineering and construction (E&C) services firm. The addition of Kentz's capabilities will make SNC-Lavalin a leading global E&C player in the oil & gas sector, with a greater presence in key growth regions, including the Middle East, North America and Asia Pacific, with a significant presence in Australia. The acquisition also meets the strategic priority of balancing the Company's risk profile by significantly raising the percentage of revenues it derives from services. This has been supported by discussions between both parties and a robust due diligence process.

"We look forward to adding Kentz to our group and significantly strengthening our capabilities in the oil & gas sector," said Robert G. Card, President and CEO, SNC-Lavalin Group Inc. "We are excited by the prospect of merging the excellent capabilities of our two oil & gas teams under the leadership of Christian Brown, Kentz's CEO, which will create a world-class team inside of SNC-Lavalin to better serve our combined clients worldwide. This proposed acquisition and the agreement to sell AltaLink are important milestones in our stated strategy for growth. Together, they give us confidence to increase our focus on the disposition of other mature assets. " he added.

"On behalf of our Board I am pleased to announce SNC-Lavalin's recommended cash offer to our shareholders, which has received unanimous support from our Board members. We feel that the Offer recognizes the value of our future prospects, world-class client base, and our excellent people; the ultimate assets of our business. It also offers certainty, in cash, to Kentz Shareholders today," said Christian Brown, CEO, Kentz. "Our track record in providing complex engineering and construction solutions to the energy sector globally, has evolved considerably from our first international projects in the 1970s, and many of the people instrumental to our growth remain with us today. We have a bright future and I believe that SNC-Lavalin's technical abilities and scale can support our continued success and bring further benefits to our employees, clients, and partners. I would like to extend my personal gratitude to all of the people that make Kentz what it is and look forward to continuing our success together."

TRANSACTION HIGHLIGHTS

• Under the terms of the acquisition, each Kentz shareholder will be entitled to receive £9.35 (C$17.13) in cash for each Kentz share, valuing Kentz's aggregate existing issued and to be issued ordinary share capital at approximately £1.2 billion (C$2.1 billion). This represents a premium of 33% to the closing price of a Kentz share on June 20, 2014, the last business day before this announcement, and a 33% premium to the volume weighted average price of a Kentz share for the 30-day period prior to the announcement.
• The acquisition is expected to be earnings accretive in the first full financial year after closing.
• SNC-Lavalin has an integration plan and a management team with significant experience and expertise to deliver a highly successful integration. The transaction is expected to deliver strong financial benefits, including estimated annual cost synergies of approximately C$50 million by the end of the first full financial year after closing.
• This acquisition is expected to increase SNC-Lavalin's headcount by about 14,500, creating a combined company of about 44,500^*, with 18,500^* employees dedicated to the oil & gas sector.
• The acquisition is expected to raise SNC-Lavalin's overall backlog by C$4.9 billion, approximately 78% of which is expected to come from lower risk/higher margin services-based contracts. This is expected to bring the total backlog of the combined company to approximately C$13 billion*.
• Kentz's Board of Directors has unanimously agreed to recommend the transaction to Kentz's shareholders.
• The acquisition will be financed by an asset sale bridge loan of C$2.55 billion, and a term loan of C$200 million.
• Irrevocable undertakings have been received in support of the transaction in all circumstances from Kentz's directors holding Kentz shares and certain individual shareholders. Total irrevocable undertakings received represent a total of 14.4% of Kentz's outstanding shares.

BUSINESS RATIONALE

Consistent with the stated strategy

• The proposed acquisition of Kentz is consistent with SNC-Lavalin's strategy of becoming a global Tier-1 engineering and construction (E&C) company, with a leading position in the oil & gas sector:
  • Significantly increases SNC-Lavalin's exposure in the higher margin oil & gas sector, and is expected to raise the percentage of its annual revenue derived from oil & gas services from 7 to approximately 24%^*.
  • Transforms SNC-Lavalin's Oil & Gas business, creating a group with 18,500^* highly qualified employees worldwide and providing important industry scale.
  • Adds upstream capabilities, Liquefied Natural Gas ("LNG") expertise, as well as unconventional oil & gas capabilities to SNC-Lavalin—in the oil sands, and in the shale gas growth sector following Kentz's acquisition of Valerus Field Solutions in January 2014.
  • Combined company will draw from SNC-Lavalin's expertise (in front-end design and engineering) and Kentz's expertise (in construction management, commissioning and asset management) to increase the breadth of services offered to clients.
  • Enhances SNC-Lavalin's ability to carry out larger and more complex oil & gas projects which meet client expectations for schedule and budgetary performance.
• The acquisition is expected to create greater balance in SNC-Lavalin's overall risk profile by raising the expected portion of annual revenues the Company derives from services contracts from 34% to approximately 40%^*.

Extending geographic reach and expanding in high-growth regions

• The combined company will have a stronger North American presence, particularly in the US.
• The acquisition is expected to materially increase SNC-Lavalin's current annual revenues from the Middle East and Asia-Pacific, with a significant presence in Australia.
• Complementary expertise, clients and exposure to attractive sectors
• The companies have complementary skills and services with limited overlap, which are expected to drive future revenue growth.
• The expanded service offering has the potential to generate cross-selling opportunities to the combined customer base, such as expanding the upstream and environmental service offering internationally.
• The acquisition is expected to increase SNC-Lavalin's access to a blue-chip client base.
• The combined company will leverage the most efficient and effective processes, systems and policies to enhance future growth and delivery of services to our clients.
• Kentz is a highly client-focused organization that benefits from strong relationships, which generate a high degree of repeat business.
• To derive the optimal value, Kentz will be fully integrated into SNC-Lavalin by incorporating SNC-Lavalin's oil & gas business into Kentz's operations. The combined operation will be managed by a leadership team selected from a mix of talent from both companies under the leadership of Christian Brown, Kentz's Chief Executive Officer, who will in turn report to Neil Bruce, President, Resources, Environment & Water, SNC-Lavalin.
• Kentz's and SNC-Lavalin's experienced and talented management teams bring complementary strengths and deep industry knowledge to grow the business.

"We are thrilled at the prospect of joining forces with Kentz, a company with an excellent reputation, repeat business from satisfied clients and an extensive track record for high-quality work," said Neil Bruce, President, Resources Environment & Water, SNC-Lavalin Group Inc. "This acquisition complements our existing client offering, further broadens our geographic reach in high-growth regions, and is expected to drive future revenue growth and cross-selling opportunities. By increasing our mid- and upstream greenfield capabilities in oil & gas, as well as enhancing our ability to efficiently complete, commission and provide asset support for projects, we will jointly be better able to help clients maintain and enhance their facilities affordably, safely and efficiently."

RBC Capital Markets is acting as financial adviser and corporate broker to SNC-Lavalin. Morgan Stanley and Ondra Partners have also provided financial advice to SNC-Lavalin. SNC-Lavalin's legal adviser is Norton Rose Fulbright and Stikeman Elliott acted as special board consel. SNC-Lavalin's accountants are Deloitte LLP. Maitland acted as financial communications consultants.

OFFER DETAILS AND TIMETABLE

The acquisition is planned to be effected by means of Court-sanctioned scheme of arrangement in Jersey. The transaction will be subject, inter alia, to the satisfaction or waiver of the conditions, the approval of the scheme of arrangement by the Kentz shareholders, the receipt of applicable regulatory approvals and the Court's sanction of the scheme of arrangement. All relevant documentation will be made available on SNC-Lavalin's website at www.snclavalin.com.

Details of the recommended acquisition will be sent to Kentz shareholders within 28 days of the date of this announcement. It is anticipated that the acquisition will be completed in the third quarter of 2014.

Note: the reference exchange rates assumed are £1:C$1.832 and US$1:C$1.077

* Pro-forma 2013 figures based on 2012A of the Valerus business (Kentz Circular dated December 9, 2013)

CONFERENCE CALL INFORMATION

SNC-Lavalin will hold a conference call on Monday, June 23, 2014 at 8:00am EDT to discuss the proposed acquisition of Kentz with the financial community and media. Participants will include Robert G. Card, President and CEO, SNC-Lavalin; Neil Bruce, President, Resources, Environment & Water, SNC-Lavalin; and Alain-Pierre Raynaud, Executive Vice-President and CFO, SNC-Lavalin. To participate, please dial toll-free at 1-866-530-1553, or 416-847-6330 in Toronto, or 514-223-0612 in Montreal, or 08002790444 in the United Kingdom. Please note that this call will be accompanied by an online presentation that will be available on the main page of SNC-Lavalin's website approximately one hour prior to the call. A recording of the conference call will also be available on our website within 24 hours following the end of the call. Members of the media are welcome to listen-in during the question period dedicated to financial analysts, following which they will be invited to ask questions related to this announcement.

ABOUT SNC-LAVALIN

SNC-Lavalin Inc. (TSX: SNC) is one of the leading engineering and construction groups in the world, and is a major player in the ownership of infrastructure and in the provision of operations and maintenance services. Founded in 1911, SNC-Lavalin has offices across Canada and in over 40 other countries around the world, and is currently active in some 100 countries. www.snclavalin.com

ABOUT KENTZ CORPORATION LIMITED

Kentz is a global engineering specialist solutions provider, which serves a blue chip client base primarily in the oil & gas, petrochemical and mining and metals sectors. It is listed on the London Stock Exchange (symbol: KENZ). Kentz has over 14,500 employees in 36 countries. Its three main business lines are: Engineering and Projects, Construction, and Technical Support Services (TSS). It has a proven track record of delivering mechanical, electrical, controls and instrumentation engineering, construction and management services in some of the most remote locations on earth.

ADDITIONAL INFORMATION

This press release is not intended to form the basis of any investment decision. It does not constitute an offer or invitation for the sale or purchase of any securities, businesses and/or assets or any recommendation or commitment by SNC-Lavalin or any other person and neither this press release, nor its contents nor any other written or oral information made available in connection with the transaction shall form the basis of any contract.

This press release has been prepared without reference to your particular investment objectives, financial situation, taxation position and particular needs.

If you have any doubt regarding these matters, you should consult your financial or other advisers.

This press release does not purport to be comprehensive or to contain all the information that a recipient may need in order to evaluate the transaction. No representation or warranty, express or implied, is given and, so far as is permitted by law and no responsibility or liability is accepted by any person, with respect to the accuracy or completeness of the press release or its contents or any oral or written communication in connection with the transaction. In particular, but without limitation, no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on, any projections, targets, estimates or forecasts contained in this press release. By publishing this press release, SNC-Lavalin does not undertake any obligation to provide any additional information or to update this press release or any additional information or to correct any inaccuracies which may become apparent.

FORWARD-LOOKING STATEMENTS

This press release contains statements that are or may be "forward looking statements" or "forward looking information" within the meaning of applicable securities laws. All statements other than statements of historical facts included in this press release may be forward looking statements. Without limitation, any statements preceded or followed by or that include the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "should", "could", "would", "may", "anticipates", "estimates", "synergy", "cost-saving", "projects", "goal" or "strategy" or, words or terms of similar substance or the negative thereof, are forward looking statements. Forward looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, economic performance, indebtedness, financial condition, losses and future prospects; and (ii) business and management strategies and the expansion and growth of SNC-Lavalin or Kentz's operations and potential synergies resulting from the transaction.

These forward looking statements are not guarantees of future financial performance. Such forward looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements, which speak only as of the date hereof. All subsequent oral or written forward looking statements attributable to SNC-Lavalin or any of its directors, officers or employees or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. SNC-Lavalin disclaims any obligation to update any forward looking or other statements contained herein, except as required by applicable law.

For further information:

Media:
Lilly Nguyen
Public Relations Manager, Global Corporate Communications
SNC-Lavalin Group Inc.
514-393-8000, ext. 54772
lilly.nguyen@snclavalin.com

Investors:
Denis Jasmin
Vice-President, Investor Relations
SNC-Lavalin Group Inc.
514-393-8000, ext. 57553
denis.jasmin@snclavalin.com

(SNC.)