Arcadis acquired SENES Consultants Ltd and its affiliated company DCS Limited. SENES is a Canadian-based firm specializing in environmental, radiological and risk assessment services for the mining, energy, oil & gas and industrial sectors. DCS provides site assessment and remediation services. SENES has six offices spread throughout Canada, an office in the US and a majority interest in a subsidiary with four offices in India. In the developing Indian environmental market, SENES has a growing presence serving large private sector clients.
Together they have approximately 250 employees and annual gross revenues of CAN$ 31m (€ 23m).
Deal makes strategic sense:
This acquisition is in line with recent management statements that it was looking to strengthen its position in Canada, especially in the field of Energy and Mining. SENES’s expertise in environmental, radiological, social, and health impact assessments will complement Arcadis’s services outside of Canada also. Management will remain on-board and the Indian operations put Arcadis on the map when it comes to environmental services, albeit with a small position.
Immediately Eps accretive:
SENES and DCS book above average margins (>10% on net revenues) while the companies are net debt free. Since Arcadis usually pays 6-8x EV/EBITA, we expect the price paid to lie somewhere between € 10-20m. Given the above average margins, and the deal to be financed out of cash and bank financing, the acquisition should be immediately Eps accretive. We bank on ~1.0%. The businesses also perform in-line with Arcadis’ ROIC target of 15%.
Conclusion:
The acquisition represents roughly 1% of Group revenues, too small to move the needle but strategic nevertheless. We estimate that the deal will be immediately Eps accretive (~1% on FY13 numbers). We expect Arcadis to continue to look for small and medium sized add-on acquisitions, foremost in Emerging countries.
We stick to our Accumulate rating on Arcadis and € 23/sh TP.