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Get ready for another big player in Canadian contracting
It’s been a relatively quiet couple of years for acquisitions in the Canadian construction market. The proposed $1.5 billion takeover of Aecon Group Inc. by a state-owned Chinese company in 2017 is one exception, but of course, the federal government ultimately stepped in to block the purchase. Since then, the deals have stayed relatively small.
This changed at the end of July when Bird Construction Inc. agreed to buy Stuart Olson Inc.
Both Canadian companies have century-long histories and each was already a significant player in the industry in its own right. Bird and Stuart Olson ranked eighth and 11th, respectively, in our Top Contractors report this year, for instance. The result of the purchase will be a contractor firmly within the top 10 in the country, with combined revenues of $2.3 billion, based on fiscal 2019 performance.
In short, it’s the biggest shakeup in the market for quite some time, despite the less than eye-popping sticker price.
The $96.5 million cash and stock buyout is expected to boost Bird’s top line, give it a foothold in new geographies and industry segments, and expand its capacity to take on new work. The Mississauga, Ont.-headquartered firm said in July the deal will create a company with approximately 5,000 staff and a $3 billion backlog.
For Stuart Olson’s part, president and CEO David LeMay noted the COVID-19 pandemic and major changes within the Canadian economy have created considerable challenges for the Calgary-based firm. The company has been under pressure for some time. Known as the Churchill Corp. until 2014, Stuart Olson has been working on diversifying its business since Canada’s energy industry began squeezing spending in response to low crude prices more than five years ago.
Since July, the two companies have been working to finalize the tie up. The deal got the requisite green-light from the Competition Bureau in early September, followed by approvals from Stuart Olson’s lenders and shareholders Sept. 21. All lenders and nearly 95 per cent of shareholders voted in favour of the deal.
“We look forward to welcoming Stuart Olson shareholders to what will be a dynamic company, combining two strong, experienced workforces with substantially increased depth and breadth, well positioned to drive sustainable value creation and provide sustainable dividends to shareholders,” Teri McKibbon, the president and CEO of Bird, said following the vote.
Initially expected to close in the fourth quarter of 2020, the timeline for the deal was moved up to late September as the pieces fell into place. McKibbon noted that both companies are focused on integration planning leading up the Sept. 25 closing date.
The emergence of a beefed-up Bird Construction also comes at an interesting time for the industry. The past several years has seen a number of large international players move into Canadian construction, and the P3 market in particular. Some industry watchers have pointed to a dearth of large domestic contractors capable of taking on increasingly costly and complex projects as one reason for the encroachment. In turn, another big player in the industry may translate to more homegrown companies taking the lead on these multi-faceted building projects. Time will tell.
David Kennedy / Editor dkennedy@on-sitemag.com
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