(Adds stock price, CEO comment from call)
Feb 9 (Reuters) - SNC-Lavalin Group said on Tuesday it would sell its underperforming oil and gas business to an energy services company backed by private equity firm Blue Water Energy, sending the Canadian group’s shares up more than 8% in early trade.
The sale to Kentech Corporate Holdings Ltd will allow SNC-Lavalin to focus on its high-performing engineering services.
The Montreal-based construction and engineering company had announced restructuring actions in July 2019, including plans to exit fixed-price contracts to reduce its risk profile. (reut.rs/3cWWJOX)
“Our priority is absolutely in the growth of the engineering services business, so to get this fully transitioned to being a leading professional services and project management company,” SNC-Lavalin Chief Executive Ian Edwards told analysts.
Exiting oil and gas fixed-price contracts would further reduce the company’s business risk, he said.
While the deal is expected to close in the second quarter of 2021, Montreal-based SNC-Lavalin expects a fair value writedown in the range of $260 million to $295 million, almost entirely non-cash in nature, in the fourth quarter of 2020.
The company said in a statement its resources unit would mainly comprise service projects in the mining and metallurgy division.
Kentech expects the deal to accelerate its revenue growth to $1 billion on a proforma basis by the end of 2021.
SNC stock rose 8.25% to C$24.67 a share in Toronto trading. (Reporting by Shreyasee Raj in Bengaluru and Allison Lampert in Montreal; Editing by Sherry Jacob-Phillips and Edmund Blair)