Surbana Jurong snaps up Australia's SMEC for S$400m

Singapore

IN its largest acquisition to date, Surbana Jurong Pte Ltd has bought Australia-based engineering consultancy firm SMEC Holdings Ltd (SMEC) for S$400 million.

This immediately scales up the Temasek unit into the largest development consultancy group, based in the Asia-Pacific, with over 95 offices across more than 40 countries in Asia, Australia, the Middle East, Africa and the Americas.

The combined entity will have an estimated annual revenue of about S$1.1 billion, more than double Surbana Jurong's annual consultancy fees of S$500 million; its headcount will go from over 4,000 to nearly 10,000.

With this, Surbana Jurong crosses its target of a staff strength of 6,000 and looks set to reach its revenue target of S$1.5 billion by the end of this year, said group chief executive officer (CEO) Wong Heang Fine.

These targets will be achieved far sooner than the three- to five-year time frame that the group had set for itself when Surbana merged with Jurong International in June last year.

Surbana Jurong is thus training its eyes on fresh goals:

Mr Wong said the group is shooting for an annual revenue of between S$2.5 billion and S$3 billion in the next three to five years; the future growth of the combined entity will be driven by both organic and inorganic growth.

SMEC CEO and managing director Andy Goodwin revealed that there are already some S$160 million in projects, including one in Brisbane, for which the two companies have jointly submitted proposals.

"In the markets that we are in, with the skill sets that we offer, it would not be unreasonable to expect organic growth in the region of 10-15 per cent per year," he said.

The high-powered marriage of the two companies resulted from a courtship that began in December, which Surbana Jurong chairman Liew Mun Leong said turned the duo from "rivals" into bedfellows.

Both companies share a similar pedigree in that they both undertook several showcase development projects back home. It is thus timely for both to share their expertise and capture the huge market opportunities, Mr Liew said.

The Supreme Court of Victoria had on July 18 approved the scheme of arrangement between SMEC and its ordinary shareholders, under which Surbana Jurong Holdings (Australia) Pty Ltd will acquire 100 per cent of SMEC at A$1.90 per share in cash.

SMEC had 587 private individual shareholders when it transferred all its shares to Surbana Jurong in exchange for cash on July 25, with 99.96 per cent of shares held having voted in favour of the sale.

The SMEC management will remain in place with SMEC's CEO reporting to the Surbana Jurong group CEO. SMEC will retain and grow its own brand, becoming a division that spearheads Surbana Jurong's global infrastructure operations.

Mr Wong noted that the minimal overlaps in core technical competencies and geographies of the two companies underscore the marriage as one "match-made in heaven".

For instance, SMEC is strong in major infrastructure projects in the urban transport, energy and water sectors, while Surbana Jurong's expertise lies in urban planning, township and industrial development.

By coming together, they will offer complete value-chain services in urban and infrastructure solutions to clients globally, he added. This also means that Surbana Jurong will be able to move into downstream work through SMEC; projects such as the high-speed rail, for instance, become feasible.

SMEC, established by the government in 1949 to build the Snowy Mountains Hydroelectric Scheme, was privatised in 1993 and owned by its employees. With more than 75 offices in Asia, Africa, Australasia and North and South America, it runs some 3,200 projects at any one time. Only 1,100 of its 5,800-strong workforce are based in Australia.

It is ranked 69 (up from 76 in 2015) among the top 150 global design firms based on global revenue, Engineering News-Record (ENR) magazine reported.

Surbana Jurong, which has shaped over a million homes in Singapore and now employs more than 4,000 staff in 26 offices across Asia, Africa and the Middle East, has been expanding rapidly through acquisitions.

A six-strong steering committee comprising senior-management executives from both companies will look into how Surbana Jurong and SMEC will work together going forward.

Mr Liew said that, for a start, about 10 primary markets (in which the combined group has strong operations) have been identified; another 40 secondary markets (where the combined group has no operations but is keen) and 10 opportunistic markets have also made it to a list within the group's crosshairs.

A Brisbane project to provide civil engineering service and advice to Springfield Land Corporation will be the first project the two companies will work on together.

Mr Wong said that there are other technical competencies that Surbana Jurong is still looking to enhance, such as in healthcare facilities, aviation engineering and underground engineering.

The group is also keen to deepen its collaboration with financial institutions and bring that added value of infrastructure or urbanisation funding for clients, he added.