The Successful Investor Hotline – Friday, June 27, 2014

Article Excerpt

SNC-LAVALIN GROUP INC., $55.89, Toronto symbol SNC, rose 7% this week after announcing a major acquisition. The company has agreed to buy U.K.-based Kentz Corp. Ltd. (London exchange symbol KENZ), which provides engineering and construction services to the oil and gas industry. Kentz operates in 36 countries, which should increase SNC’s exposure to fast-growing regions like the Middle East, Asia and Australia. In addition, Kentz’s expertise will let SNC bid on more-complex oil and gas projects. Following the purchase, oil and gas developments will supply 24% of SNC’s revenue, compared to 7% now. SNC will pay $2.1 billion for Kentz, which is equal to 25% of its $8.5-billion market cap. If Kentz shareholders approve, SNC should close the deal by September 30, 2014. By combining overlapping operations, SNC should be able to cut $50 million from its annual costs by the end of the first year. Kentz will also increase the company’s order backlog by 60%, to $13 billion, or 1.6 times its 2013 revenue…