Colt Engineering Corp., a private Calgary company focused on the oil sands, is selling itself for $1-billion to Australia's WorleyParsons Ltd., saying that being part of a larger foreign company is the best choice to pursue further growth.
Founded in 1973 by two engineers in a small office above a welding shop in Edmonton, Colt has grown to employ 4,600 people. It had considered an initial public offering to generate funds to support increasing contracts for oil sands work and ambitions beyond Canada. But after months of looking at various options, the company chose to sell to WorleyParsons.
Larry Benke, president of Colt, said selling was the best choice to "propel growth and to take advantage of the opportunities that we feel are in front of us."
"We see it as an opportunity to continue to grow," said Mr. Benke, who joined Colt four years after it was founded.
Colt's operating profit has roughly tripled in recent years, sitting at about $110-million in the fiscal year ended Jan. 31, up from about $35-million in the year ended Jan. 31, 2004, making for a growth rate of almost 50 per cent annually.
The engineering of oil sands projects is dominated by large, international firms, led by Bechtel Group Inc. of San Francisco, along with Bechtel's Canadian arm, Bantrel Co. Other major names include Fluor Corp., based in Irving, Tex.
Colt's website says the company aims for a "bigger dream," seeking "to expand in North America and into the international market."
WorleyParsons made its first acquisition in Canada in 2003, spending about $3-million for a 50-per-cent stake in a small engineering firm. It later spent about $60-million to buy the rest of that first firm, and several others.
WorleyParsons said it wants to use Colt to "capitalize on the significant untapped demand in the Canadian market."
Mr. Benke said that selling to WorleyParsons would give Colt an advantage to win larger projects in Canada and Alaska. Mr. Benke will be in charge of WorleyParsons's operations in Canada.
Shortly after it was founded, Colt expanded to Calgary. It has an office in Edmonton, and eventually expanded to Ontario, with outposts in Toronto and Sarnia. It also has an office in Anchorage, Alaska. The firm's main business is oil and natural gas and it is also involved in power. Colt does work for Syncrude Canada Ltd., the largest oil sands operation, as well as Petro-Canada, Nexen Inc. and Imperial Oil Ltd., the company's first customer.
Colt also has contracts with the world's largest energy companies, including Exxon Mobil Corp., BP PLC and ConocoPhillips Co.
Colt will account for about one-fifth of the combined company, as measured by employees. WorleyParsons has offices in 30 countries.
John Grill, WorleyParsons's chief executive officer, said the acquisition of Colt is a "unique opportunity" to secure a bigger position in what he called "one of the world's largest and fastest growing hydrocarbons markets." He added that Colt's expertise in the oil sands and in cold-weather engineering will help WorleyParsons compete internationally.
Roughly $100-billion is slated to be invested in the oil sands of northern Alberta over the next decade, which could make the region one of the largest oil sources on earth and push Canada into the ranks of world's top five producers.
About one-third of WorleyParsons's offer is being funded by debt and it hopes to pay for the rest with new shares. Trading in stock of WorleyParsons will be halted until Feb. 14, while the company's brokers drum up buyers for the new shares. The Australian Securities Exchange granted the lengthy trading halt.
WorleyParsons's takeover of Colt is expected to close in March.
David Ebner