Tetra Tech Swoops In With Deal To Buy British Environmental Firm; Move Could Trigger Bidding War

Pasadena-based engineering and consulting firm Tetra Tech Inc. announced its largest acquisition late last month: an agreement to purchase a UK environmental consulting firm for $ 691 million. But not so fast.

Tetra Tech is facing a potential bidding war for the UK's RPS Group plc, based in Abingdon-on-Thames. In fact, Montreal-based consulting and engineering giant WSP Global Inc. announced in early August that it has reached an agreement to purchase RPS Group for $ 641 million.

When Tetra Tech's superior offer arrived six weeks later, the board of directors of the RPS group withdrew acceptance of WSP Global's offer and immediately accepted Tetra Tech's offer; RPS and Tetra Tech jointly announced their agreement at the end of September 23rd.

On September 26, WSP Global released a statement saying it was "considering its options". The company could withdraw or soften its offer, which would spark a bidding war.
At the center of the impending battle is the RPS Group, an environmental and water infrastructure consulting firm founded in 1970 with 5,000 employees and $ 757 million in annual sales. Although the company has around 100 offices in 12 countries, it focuses on its countries of origin, the United Kingdom, the European Union and Australia.

For Tetra Tech, which has grown rapidly over the past 20 years, the acquisition of the RPS Group, once completed, represents an important opportunity to expand water and wastewater management practices in the region.

"The RPS Group continues our long-term strategy to strengthen our position as the world's leading engineering and consulting firm focused on water, environment, sustainable infrastructure and energy transition," said Dan Batrack, CEO of Tetra Tech, in a Note. . Announcement of the operation on 23 September.

If the deal is successful, Tetra Tech will increase to 26,000 employees overnight, from the current 21,000. Revenues will also increase significantly from $ 3.2 billion in 2021.
After RPS Group's board of directors approved Tetra Tech's offer, RPS Group executives said in an announcement that Tetra Tech offers greater shareholder value and a better fit for their companies.

"The board of RPS is pleased to recommend the Tetra Tech offering, which offers our shareholders more value for their shares," Ken Lever, non-executive chairman of RPS, said in the announcement. "Our partnership with Tetra Tech will bring exciting opportunities and long-term benefits to our global employees and customers."
John Douglas, CEO of RPS Group, said the deal will provide more opportunities for the RPS Group to realize its vision.

"Tetra Tech provides RPS and its employees with a robust and culturally aligned platform that creates exceptional consulting and engineering practices that address climate change and all its impacts."

serious competitor

But if WSP Global enters the fray with a watered-down offer, it will be a formidable opponent for Tetra Tech. The company is much bigger than Tetra Tech: 57,000 employees and $ 8.1 billion in sales in 2021. And it has much more aggressive expansion plans: The company said in its 2021 annual report that it intends to increase its size. in the next years. . . The stated goal is to become one of the leading environmental and infrastructure consulting firms in the world.

WSP has made several significant acquisitions in recent years, including New York-based Parsons Brinckerhoff in 2014 for $ 1.3 billion and Toronto, Ontario-based Golder Associates at the end of 2020 for $ 1.1 billion.

And just three months ago, WSP announced it had agreed to buy the environmental and infrastructure business of John Wood Group, based in Aberdeen, Scotland, for $ 1.8 billion; The agreement expires on 21 September.

Meanwhile, Tetra Tech has entered into many smaller deals which are generally strategic and case-by-case.
"WSP has a reputation for being aggressive when it comes to mergers and acquisitions, while (Tetra Tech) is historically conservative," said Andrew Wittmann, senior research analyst at Baird, a Milwaukee-based investment bank and research firm. , Washington, Wisconsin. in a research note dated September 26.
Wittmann said in his memo that he "would not rule out another offer" from WSP Global for the RPS group.

See page 10 for more news from Tetra Tech.

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