AtkinsRéalis sells stake in 407 highway, rounding off turn to pure-play engineering

AtkinsRéalis Group Inc. reported its fourth-quarter profit fell compared with a year ago as it announced the sale of its remaining stake in the company that owns the Highway 407 ETR toll highway north of Toronto. Company signage is shown in Montreal, Friday, Nov. 10, 2023. THE CANADIAN PRESS/Christinne Muschi

MONTREAL — AtkinsRéalis Group Inc. announced the sale of its remaining stake in Ontario’s 407 toll highway operator in a $2.79 billion deal that caps off the company’s conversion into a pure-play engineering firm.

The Montreal-based company said Thursday it had signed agreements with subsidiaries of Spanish multinational Ferrovial SE and the Canada Pension Plan Investment Board to sell its current 6.76 per cent share of 407 International Inc.

The transaction follows one completed in 2019 that saw the company, then known as SNC-Lavalin, sell 10 per cent of its stake in the highway north of Toronto to a company controlled by the CPPIB for a base price of $3 billion, plus an additional $250 million to be paid over 10 years if certain financial targets are hit.

The newly announced deal is expected to close in the second quarter of this year.

“This is an important step in our strategic journey to simplify the business, create value for shareholders and become a focused, world-class engineering services and nuclear company,” said chief executive Ian Edwards.

Proceeds from the transaction will go toward paying down debt, funding “small- and medium-sized acquisitions” and returning capital to shareholders, he told analysts on a conference call.

The sale price amounts to a higher valuation on the toll route than analysts had expected, said Maxim Sytchev of National Bank.

“Clearly we’re really pleased to have gone into this agreement,” Edwards said.

Asked about prospects in the U.S., where tariffs on billions of dollars in imports have sparked doubts about infrastructure spending and the broader economy, he expressed confidence in the company’s outlook.

“Regardless of geopolitical turmoil, the markets are still underpinned by this need to replace aging infrastructure and increase the electrical generation and energy transmission,” Edwards said.

“We’re pretty confident in the markets.”

Nonetheless, many engineering and construction outfits are watching closely after U.S. President Donald Trump last month ordered a freeze on infrastructure spending approved under the Biden administration, which had allocated billions of dollars to states and cities for everything from highway expansions to water system upgrades. As of September, about 60 per cent of the money remained unspent.

Transportation comprises AtkinsRéalis' biggest market, accounting for about one-third of its revenue.

As evidence of its sturdiness, Edwards pointed to a big jump in the company’s services backlog, which ballooned 25 per cent to $17.2 billion last year.

Powering the leap are nuclear energy contracts. Atkins subsidiary Candu Energy secured a deal to build two new multibillion-dollar reactors at the Cernavoda nuclear plant in Romania.

It recently entered into a multibillion-dollar contract for a life extension on a reactor at Ontario’s Pickering nuclear power station.

And earlier this month, the federal government announced a preliminary agreement to finance half the cost of Candu’s proposed Monark reactor — AtkinsRéalis' latest homegrown nuclear technology — with a $304-million loan.

“We’re working very hard to market the Candu and to sell the Monark and the existing reactor, and to compete on the world stage with what’s only really four other players: the French, the Koreans, the American technology and ours,” Edwards said.

The one drain on the company’s income statement remained three so-called lump-sum turnkey (LSTK) construction contracts: Toronto’s Eglinton Crosstown light-rail transit system, Ottawa’s Trillium Line and the greater Montreal area’s REM light-rail network extension.

The legacy segment yielded $84.4 million in adjusted losses before interest and taxes. The loss stemmed mainly from higher commissioning costs on the recent completion of the Trillium project and “additional provisions related to future delays” to the start of operations at the Eglinton LRT, which began construction in 2011.

The backlog on the costly LSTK division — its fixed-price contracts mean companies must pay for any cost overruns themselves — sat at $234.3 million, down from $364.6 million a year ago.

In its latest quarter, the company saw net income fall 42 per cent year-over-year to $52.4 million amid lower revenue and profit margins in Canada and the U.S.

Revenue for the quarter totalled $2.59 billion, up from $2.28 billion in the same quarter last year, it said.

On an adjusted basis, AtkinsRéalis said its professional services and project management business earned 26 cents per diluted share, down from an adjusted profit of 45 cents per diluted share a year ago.

The company forecasted an organic revenue increase from engineering services of between seven and nine per cent this year, with an adjusted earnings margin of 16 to 17 per cent.

Nuclear services would power much of the boost, with revenue from the fast-growing division predicted to hit between $1.6 billion and $1.7 billion versus $1.49 billion last year.

For the Highway 407 sale, 5.06 per cent of the company would go to Ferrovial for $2.09 billion. The remaining 1.70 per cent would go to CPP Investments for $700 million.

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Christopher Reynolds, The Canadian Press

This report by The Canadian Press was first published March 13, 2025.