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Engineering and consulting group Cardno (ASX: CDD) has sold its US and Asia Pacific divisions for US$500 million ($667 million), with most of the proceeds set to be distributed to shareholders through a combined capital return and dividend payout.
The businesses, comprising the Americas Consulting Division and its Asia Pacific Consulting Division, have been bought by global professional services provider Stantec Inc. (NYSE: STN).
The sale resulted from a strategic review by Cardno earlier this year after it fielded a number of inquiries for the operation in the wake of rising demand for construction services in the US.
The deal comes on the back of a strong performance by Cardno's shares which are up more than 400 per cent over the past year, with today's announcement alone sending CDD shares up 17 per cent.
Cardno chairman Michael Alscher says the sale represents a ‘compelling financial outcome’ for shareholders and ‘creates significant opportunities for Cardno’s staff and clients with Stantec’.
“The board will continue its strategic review of Cardno’s remaining operations to determine the best way to maximise returns for shareholders,” he says.
Once the deal is settled, Cardno intends to distribute between $567 million and $600 million to shareholders, representing a payout of between $1.40 and $1.49 a share based on a US75c exchange rate. The proposed distribution will be a mix of capital return and an unfranked dividend.
Stantec CEO Gord Johnson sees the acquisition as creating a ‘global champion in ESG consulting service and reinforces our leadership position in sustainable infrastructure design’.
“Our two firms are culturally compatible with service offerings and geographies that are highly complementary,” Johnson says.
The US and Asia Pacific divisions delivered gross revenue of $570 million for Cardno in FY21, representing a big slice of the group’s total revenue of $890 million.
Following the sale, Cardno intends to focus on its International Development business, which accounts for about a third of group revenue. This division generated gross revenue of $304.0 million and EBITDA of AUD$4.1 million last financial year.
“Cardno going forward will be a leading provider of International Development services to DFAT, USAID and other development aid agencies,” says Alscher.
The sale is still subject to shareholder approval, scheduled for an extraordinary general meeting on 6 December.
Cardno’s largest shareholder Crescent Capital Partners, with 55.9 per cent, intends to support the sale unless a better deal emerges.
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