Stantec sells MWH Constructors to Oaktree Capital Management
Edmonton-based Stantec has sold its construction division, MWH Constructors, to global asset management firm Oaktree Capital Management. The sale includes MWH Constructors’ UK and US divisions, and Slayden Constructors.
Stantec acquired the UK-based water treatment, engineering, and construction services company in 2016 for $795 million. The firm and construction division formed out of it, unfortunately, were money losers for Stantec. In its Q2 results, the Canadian design and engineering consultancy reported negative results for its Construction Services business, with negative revenues of $16.3 million on UK waste-to-energy projects, $5.4 million in losses on a US design-build contract, and $3 million lost on legacy US hard-bid projects.
Earlier in the year, in April, Stantec had already announced that it was strategically reviewing its construction services business to ‘optimize’ its value. Now, Stantec has decided to cut its losses by selling MWH Constructors to Oaktree Capital Management a little over two years since it was acquired as part of MWH Global.
With the divestiture of its underperforming construction business, Stantec will look to focus on its Consulting Services business, which has been driving growth for the firm. In its Q2 results, the consulting business realized 4.5% organic net revenue growth over Q2 2017. The company has made eight strategic acquisitions this year pursuant to this plan – including the acquisition of Australian buildings engineering consultancy Wood & Grieve.
“We are excited to join Oaktree’s construction portfolio focused on project delivery,” commented Blair Lavoie, president of MWH Constructors and chief of global operations. “This is a positive step in the evolution of our company, and we look forward to having a partner like Oaktree with strong financial resources and a desire to invest in our future as we continue to be the leading global project delivery company in the water sector.”
The buyer, Oaktree Capital Management, is the largest distressed investor in the world. The Los Angeles-based firm had US$122 billion in assets under management as of June 30, 2018. Its clientele includes many of the largest US pension funds, as well as public funds, foundations, endowments, and sovereign wealth funds.
In the UK, Constructors (operating as Stantec Treatment) will return to its previous name of MWH Treatment, while remaining Slayden and MWH Constructors in the US. In the UK, the firm primarily works on design-build water and wastewater projects; in the US, Slayden and Constructors provide construction services to government, utility, and industrial clients. Constructors generated $1 billion in gross revenues in 2017, and employs about 1,900 professionals in the UK and North America.
Commenting on the transaction, Stantec president and CEO Gord Johnston said, “MWH Constructors has growth opportunities in the United Kingdom and the United States, and we believe this divestiture will better allow them to invest in and pursue growth while continuing to serve their clients.”
The sale is expected to close in the fourth quarter of 2018, subject to customary conditions.
