One of Britain’s oldest independent engineering companies is the latest to give up its listing on the London stock market after accepting a takeover offer from a Canadian bidder.
Ricardo, which was founded in 1915 by engine design pioneer Sir Harry Ricardo, is being sold to Montreal based consulting giant WSP Global in a £281 million cash deal.
Ricardo shareholders will receive 430p for each share held, a 28% premium to last night’s closing price and a 69% premium to the average 254p price over the last 90 days.
WSP has already bought a 19.99% stake in Ricardo from activist investor Science Group. The deal is expected to complete in the fourth quarter.
Ricardo issued a profit warning in January when it warned that delays in orders would hit full-year results.
Ricardo's directors said they unanimously consider the WSP offer to be "fair and reasonable" and consider the terms of deal to be "in the best interests of Ricardo shareholders as a whole".
WSP was itself listed in London until 2012 when it was bought by Canada’s Genivar which adopted the name of its target.
Shoreham-on-Sea based Ricardo has around 2,700 employees in more than 20 countries. The company was formed as Engine Patents Limited by Sir Harry Ricardo during the First World War in February 1915. Its first innovation was a 600 brake horsepower engine for a flying boat.
One of its subsidiaries also played a key role in designing air pollution controls after London’s deadly Great Smog in 1952.
The company floated on the London stock market in 1962. Its share price peaked at 1075p in 2018 and was still as high as 600p as recently as April 2023.
WSP said that after the takeover it focus the business “on its leading environmental and energy transition portfolio” push through previously announced costs savings of around 20% of revenues, and combine Ricardo’s Automotive & Industrial, and Performance Products divisions “to create a single simplified business unit leveraging design engineering capabilities with the ability to take design into production”
A review of the divisions “is likely to result in a sale of the A&I and PP businesses at the appropriate time.”
Ricardo’s chair Mark Clare said: "Ricardo has made significant progress with its strategy to transform the business into a world leading environmental and energy transition consultancy, with its prospects underpinned by global mega trends supportive of long-term growth.
However, while good progress has been made, there are further steps required to complete the transformation which bring some execution risks against the background of short-term market challenges and the uncertain geopolitical and macroeconomic backdrop.
“Against this background, WSP has made a compelling offer which represents a highly attractive premium to recent average trading levels and provides certain value in cash today for Ricardo shareholders. Importantly, the Ricardo Directors believe that the acquisition will provide enhanced career opportunities for Ricardo's employees within the WSP Group as well as access for our clients to a broader service offering."
Alexander L'Heureux, President and CEO of WSP Global, said:"The proposed acquisition of Ricardo perfectly aligns with WSP's vision for sustainable, compounding growth and our clear ambitions to expand in advisory, energy transition, water solutions and the rail sector over the next three years. We are poised to enhance our ability to deliver innovative solutions as we combine our global reach and resources with Ricardo's complementary expertise.
“Moreover, the shared entrepreneurial spirit and technical excellence between our teams position us to create further value for our clients. We look forward to welcoming Ricardo's talented professionals to WSP and seizing new opportunities with our broadened service offering."
AJ Bell investment director Russ Mould said:. “Former UK-listed support services group WSP has returned to its old hunting ground and moved on environmental consultancy Ricardo.
“Canadian rival Genivar bought WSP in 2012 as a way of getting a strong foothold in the UK market and subsequently adopted its name. It has continued to grow in size and Ricardo looks to be an ideal fit for the group.
“What’s interesting is how another UK firm had been building a stake in Ricardo but has pulled off a blinding deal to sell those shares to WSP.
“Science Group built up a 21.8% stake between February and May and has now flipped those shares for a £53.5 million profit. Not bad for a business that’s only worth £234 million.
“Science Group had rattled the cage and got in a public spat with Ricardo, accusing it of poor operating performance and ineffective governance. Its profitable campaign now puts Science Group on the radar as an activist investor to watch closely.”
