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Atkins climbs 8% as it expands nuclear business

Discussion in 'Market News' started by Lily, Nov 17, 2015.

  1. Lily

    Lily Forum Member

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    Engineering consultancy to pay $318m for US nuclear services division

    A move to increase its presence in the nuclear market has lifted engineering consultancy WS Atkins by nearly 8%.

    The company, which helps maintain Britain’s roads and railways but has also been building up its nuclear business, is paying $318m (£206m) in cash for the nuclear services division of EnergySolutions (PP&T). The move follows last year’s acquisition of Nuclear Safety Associates, and allows the company to expand its ability to decommission nuclear projects, as well as bidding for larger contracts in the US. Atkins chief executive Dr Uwe Krueger said:

    This acquisition accelerates our nuclear strategy and creates a global platform. Our combined business is well positioned in all the major nuclear markets in north America, UK, Europe, Middle East and Asia Pacific. In the US, which has the largest nuclear fleet, we are at the top table for decommissioning, site operations, major projects and consultancy.

    The deal, which is expected to close in the first quarter of calendar 2016, should be between 15-20% accretive to 2017 estimated earnings before interest and tax. The acquisition will significantly accelerate Atkins’ growth in the nuclear decommissioning space, which benefits from attractive growth dynamics. Overall, we think this looks like a very attractive deal for WS Atkins.

    We think nuclear decommissioning is a robust long- term growth market, with the cumulative number of commercial plants decommissioned by 2030 likely more than double the current number. We see significant opportunities to sell into a broader combined customer base, in particular leveraging PP&T’s technology portfolio (e.g. vitrification and water clean-up) and providing a better platform for growth in for example Japan, China and Germany. Both parts of the business also have a presence in the nuclear new build market.

    The acquisition fits the stated strategy of diversifying away from the UK and growing in Energy. It is a high margin business (10.9% historic). There is technology differentiation. Atkins has known the management team for more than 10 years, which clearly reduces risk. At the interim results last week, management did talk about adding to Energy business.

    The acquisition should strengthen Atkins position in Nuclear in the UK and provide further decommissioning opportunities in Europe such as Germany. It is possible to offer EnergySolution’s Nuclear Waste removal technology (eg vitrification and water filtration) to Atkins’ existing clients, such as EDF and TEPCO. Atkins can also offer its suite of infrastructure capability (civils, Faithful & Gould etc) to EnergySolutions’ existing clients.

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