Thursday, June 25, 2009

ARCADIS buys Malcolm Pirnie

A huge M&A deal hit the newswire this morning, as ARCADIS, the Dutch engineering and consulting firm, said it is taking over Malcolm Pirnie, the privately held White Plains, New York-based water and environmental consulting firm, with everyone from The Wall Street Journal (subscription required) to The New York Times to the Reuters news service picking up on it.

According to the ARCADIS press release, it has signed "a merger agreement to acquire 100 percent of the shares of Malcolm Pirnie...currently owned by about 80 internal shareholders. At closing, Malcolm Pirnie will be a wholly owned subsidiary of ARCADIS U.S." The release states that Malcolm Pirnie has more than 1,700 employees, 2008 gross revenues of $392 million, net revenues of $294 million, and profitability close to ARCADIS' overall target EBITA margin of 10 percent. ARCADIS has more than 13,500 employees prior to the deal. According to an ARCADIS spokesman, the company does not see redundancies among the workforce of the two firms.

ARCADIS spent $222 million to acquire Malcolm Pirnie, including $135 million in cash and $86.8 million worth of shares to shareholders and some employees of Malcolm Pirnie, according to The New York Times article. The cash offer is financed by Rabobank, ING and RBS, according to the release.

SNS Securities analysts commenting on the deal wrote, "We expect that ARCADIS...will be able to bring Pirnie's margins in line with company margins through synergies, thereby creating value."

The deal is contingent on Malcolm Pirnie shareholder approval but it is anticipated that it will be completed in July 2009. "The major shareholders comprising ownership of 48 percent of the outstanding shares have provided irrevocable support of the merger," according to the release.

To get an idea of the scope of this deal, consider that Malcolm Pirnie's roots trace back to 1895, the firm has more than 60 offices and is represented in most of the top 20 major metropolitan areas of the United States. The firm's client base is heavy in the public sector, including municipalities and the federal government, balancing nicely with ARCADIS' existing private-sector client base in the United States. "Together, we are well-positioned to benefit in the short-term from the government stimulus package," says ARCADIS CEO Harrie Noy. The firm also works in Asia, the Middle East, Puerto Rico, and Chile.

ARCADIS says the integration process should take about 18 to 24 months, again demonstrating the size and complexity of the deal. The acquisition also puts ARCADIS in the top 10 of consulting engineers in the international water market as well as in the top 10 in the U.S. design, consultancy, and engineering market. "Although the impact of the economic downturn in the short term is still uncertain, the long-term outlook for our business is positive," Noy says.

According to the Reuters article, Noy says ARCADIS is not adjusting its target for a 10 percent operating (EBITA) margin in 2009, but also did not say whether the company would meet it.


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Bill Newman said...

Malcolm Pirnie apparently generates substantial revenues from state and municipal systems and expects to benefit from the stimulus package. Because it deals with critical U.S. infrastructure, do you expect that the parties will submit their deal for review to the Treasury Dept's Committee on Foreign Investment in the United States (CFIUS)? Thanks

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