Ricardo sale to Canada’s WSP lands windfall for activist investor
One of the world’s biggest consultancy firms has agreed a £281 million acquisition of Ricardo, delivering a windfall for an activist shareholder that had been seeking to oust the company’s chairman.
WSP Global has struck a surprise 430p per share cash deal for Ricardo, a smaller London-listed engineering consultancy that traces its roots back to making engines for British First World War tanks.
WSP, which is valued at C$35 billion (£19 billion) on the Toronto stock exchange, said the offer was a 28 per cent premium to Ricardo’s share price on Tuesday and a 69 per cent premium to its average price over the past three months.
The deal has been recommended by Ricardo’s board and has the backing of its biggest shareholders, making a takeover likely.
Shares in Ricardo closed up 93p, or 27.8 per cent, at 428p on Wednesday evening.
Science Group, a fellow London-listed science and technology consultancy, which has quickly built a stake of more than 20 per cent in Ricardo since February and launched a campaign to remove Mark Clare, Ricardo’s chairman, has agreed to sell most of its shares to WSP at the offer price.
Mark Clare had earlier accused Science Group of opportunism
Science Group has also agreed to adjourn a shareholder meeting next week on the future of Clare, 67, the former boss of Barratt Developments, the housebuilder, who is also chairman of Grainger, the FTSE 250 property company, and a senior independent director of Wickes, the retailer.
WSP employs about 72,600 people in more than 50 countries, providing engineering and strategic advisory services to clients across the transportation, infrastructure, environment, building, energy, water and mining and metals sectors.
It has expanded through about 180 acquisitions and was acquired by Genivar, a Canadian rival, in 2012 to gain a foothold in the UK market, before adopting its name.
WSP said Ricardo would bolster its capabilities in rail and transportation and environmental and energy where there was “limited overlap” between the two advisory businesses. It said it would also deliver cost savings and revenue enhancements.
WSP said Ricardo had “niche areas of high value expertise”, including policy, strategy and economics and would also particularly strengthen WSP’s presence in the UK, Australia and the Netherlands.
The deal could lead to the disposal of Ricardo’s automotive and industrial business, and WSP said it would “work with Ricardo’s management team to complete their strategic review of these business units”.
WSP has received irrevocable undertakings to vote in favour of the deal from Ricardo shareholders Gresham House Asset Management, Aberforth Partners and Royal London Asset Management speaking for almost 45 per cent of the stock.
Schroders, which owns about 3 per cent of Ricardo, has also backed the deal. Andy Brough, the veteran fund manager at Schroders, came out in support of attempts by Science Group to oust Clare last week.
Recommending the acquisition to Ricardo shareholders, Clare said that “while good progress has been made, there are further steps required to complete the transformation which bring some execution risks against the background of short-term market challenges and the uncertain geopolitical and macroeconomic backdrop”.
He added: “Against this background, WSP has made a compelling offer which represents a highly attractive premium to recent average trading levels and provides certain value in cash today for Ricardo shareholders. Importantly, the Ricardo directors believe that the acquisition will provide enhanced career opportunities for Ricardo’s employees within the WSP Group as well as access for our clients to a broader service offering.”
The deal is set to bring to an end a public dispute between Ricardo and Science Group. The latter had attacked the alleged poor performance, ineffective governance and destruction of shareholder value at Ricardo. That had prompted Ricardo to accuse Science Group of opportunism, aggressive tactics and attempting to take control “without paying a takeover premium”.
Science Group said it expected to receive about £53.5 million from its stake, generating a pre-tax net return of about 70 per cent. It said the offer price was a 102 per cent premium to Ricardo’s share price before Science Group began its stake building and campaign.
It said its board, led by Martyn Ratcliffe, Science Group’s executive chairman, intended to use the funds for “future strategic investments and corporate opportunities”.
Analysts at Canaccord Genuity, Science Group’s adviser, said the cash should provide a “sizeable war chest with further M&A”.