Morningstar DBRS Comments on WSP Global Inc's Announced Acquisition of Power Engineers, Inc., Issuer Rating Unchanged at BBB (high)

DBRS Limited (Morningstar DBRS) notes that WSP Global Inc. (WSP or the Company) announced on 12 August that it has entered into an agreement to acquire Power Engineers, Inc. for USD 1.78 billion. With its largely recurring revenue base, the acquisition adds scale and diversification to WSP's Power & Energy (P&E) business, which is expected to double in size. Additionally, WSP's P&E business is anticipated to grow its U.S. revenues to 20%, up from roughly 5% as at F2023.

The Company plans to fund the acquisition with approximately US$1.78 billion in new term loans and an equity raise of $1 billion ($500 million in private placements and $500 million bought public offering). The acquisition is expected to close early in the fourth quarter of 2024. The Company has a track record of deleveraging after major acquisitions, and Morningstar DBRS anticipates this level of financial discipline will continue. WSP expects net debt-to-EBITDA of 2.2 times (x) upon closing, returning to its stated guidance of net debt-to EBITDA below 2.0x by year-end 2024.

Morningstar DBRS notes that the acquisition is in line with WSP's global expansion strategy, for which it has a history of successfully integrating large businesses and a proven ability to retain key employees post transaction. While benefiting WSP's diversification and U.S market position, the acquisition does not materially change the Company's business risk profile at this point in time. However, Morningstar DBRS believes the acquisition solidifies WSP's strong market position in its core regions and is highly complementary to its existing business lines, offering material cross-selling opportunities. Overall, Morningstar DBRS' Issuer Rating on WSP and its credit rating on the Company's Senior Unsecured Notes remain unchanged at BBB (high) with Stable trends.

Notes:
All figures are in Canadian dollars unless otherwise noted.

Information regarding Morningstar DBRS ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577