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SNC-Lavalin Sees North American Unconventional Growth in Merger

Canada services giant SNC-Lavalin Group Inc. is merging with Kentz Corp. Ltd. to create a global tier one engineering and construction (E&C) firm with a bigger presence in key growth regions, including North America's onshore, management said Monday.

Once the C$2.1 billion merger is completed, SNC-Lavalin's exposure to the oil and gas sector would be significant, with the percentage of its annual revenue rising to about 24% from the current 7%. The agreement adds upstream capabilities, liquefied natural gas expertise, and unconventional drilling capabilities in the oilsands and shale/tight gas resources.

The combined company would have a stronger North American presence, particularly in the United States, management said. The acquisition also would increase current annual revenues from the Middle East and Asia-Pacific, including Australia.

SNC-Lavalin is noted for its front-end design and engineering capabilities, while UK-based Kentz is a expert in construction management, commissioning and asset management.

"We are thrilled at the prospect of joining forces with Kentz, a company with an excellent reputation, repeat business from satisfied clients and an extensive track record for high-quality work," said SNC-Lavalin's Neil Bruce, who is president, Resources Environment & Water. "This acquisition complements our existing client offering, further broadens our geographic reach in high-growth regions, and is expected to drive future revenue growth and cross-selling opportunities."

Montreal-based SNC-Lavalin would have 44,500 employees, including 14,500 from Kentz, with 18,500 dedicated to the energy sector. The combined company would operate in more than 100 countries.

The acquisition is expected to raise SNC-Lavalin's overall backlog by C$4.9 billion, 78% of which is expected to come from lower risk/higher margin services-based contracts. The total company backlog would be close to C$13 billion.

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