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UBS reiterated a Buy rating and Cdn$297.00 price target on WSP Global Inc. (TSX:WSP) (OTC:WSPOF) following the engineering firm’s acquisition of UK-listed Ricardo PLC. The deal carries an enterprise value of C$670 million and will add 2,700 employees to WSP’s existing workforce of 73,000.
The acquisition aligns with WSP’s stated growth strategy, though UBS notes Ricardo appears to be in a restructuring situation. Ricardo recently divested its Defense business and missed expectations in its Energy & Environmental segment during the first half of fiscal year 2025.
WSP plans to sell Ricardo’s automotive, industrial, and performance products businesses, which represent approximately 1,000 employees. This integration will require significant work as the companies combine operations.
Ricardo’s profitability currently lags behind WSP’s, with consensus projections showing approximately 9% EBITDA margins for Ricardo in fiscal year 2026 compared to 19% for WSP. The margin differential highlights potential challenges in the integration process.
UBS believes the timing may be opportune for this acquisition despite these challenges, suggesting WSP could derive future value from Ricardo once divestitures and integration are complete. The firm expects investors may experience some volatility pending WSP’s messaging around potential earnings accretion from the deal.
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