URS bought British firm for 290p a share, up from price of 87p at start of June
Industry commentators have expressed their shock at the £223m price paid for Scott Wilson by its new American owner URS.
The £6bn-turnover engineering giant fought off a counter-bid by fellow US consultant CH2M Hill last week, securing Scott Wilson with a raised second bid of 290p a share - up from CH2M Hill’s 245p bid, and massively up from the 87p price placed on the shares at the beginning of June.
Tony Williams, an analyst at Building Value, said the jump in value of about 233% was the highest ever for that size of company.
“It’s the biggest premium ever paid for a £100m-plus firm,” he said. “I thought it was an unbelievable price. Clearly they made their mind up - they wanted to buy this business.”
A senior figure at a rival UK consultancy said he was initially surprised by the price paid.
He said: “Given where I thought we were in the economic cycle it struck me as a lot of money. But my slightly more considered opinion was that there must be something pushing them into picking up this high quality organisation: if we don’t go now, someone else will.”
Neither bidder was deterred by the firm’s £63.3m pension deficit, although this is an improvement on the £79m liability the firm had in May 2009.
A spokesperson for Scott Wilson said the offers made by URS and CH2M Hill were “flattering”.
She said: “Both were complimentary offers. We could not help but be flattered. They really, really wanted us.”
Asked if the final price was too high, she said it reflected URS’ determination to acquire the firm, and said the 87p valuation was far too low: “To be honest our whole peer group is undervalued. I definitely don’t think Scott Wilson is worth a pound.”
She said the company was currently running as normal, but predicted that it would be rebranded in the future.
“I’m sure in time there will have to be a transition, but nothing knee-jerk,” she said. “Down the line there may be consolidations.”
She added that Hugh Blackwood, Scott Wilson’s chief executive, would sit on the operational board of URS, and that the deal is expected to take about three months to finalise.
Did URS pay too much?
Kevin Cammack, analyst at Cenkos
For most people it was an eyebrow-raising price. However, firstly they were in a competitive bid situation and clearly paid a price to keep their competitor at bay. Secondly, there is a premium for going into a new market. You’re buying the individuals, clients and relationships.
Mike Allen, analyst at Panmure Gordon
In the context of the next growth cycle then probably not, but on a short-term time scale it will look expensive. URS are comfortable with the culture of the company. Absolutely Scott Wilson was undervalued at under a pound. It should have been more like £1.30.
Francesca Raleigh, analyst at Numis
I think it’s a high multiple reflecting the fact that a US company wanted a bridgehead into Europe. Scott Wilson was the available one, if you like. There’s a shortage of available businesses in play. The buyers of Scott Wilson seem to be comfortable with the pension fund deficit.
Tony Williams, analyst at Building Value
The short answer is yes. Normally you’d pay 50% of turnover in bad times and 100% in good times. They paid about 70%.
In the short term it will be value diluting, but in the long term it will create value.
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