Carillion Canada acquires Vanbots Construction Corp.

Multi-national giant Carillion Canada has tied the knot with Vanbots Construction Corp. in an acquisition that cements its position as a formidable contender for future P3 bidding.

The deal was announced quietly earlier this month, though industry talk of the acquisition of Vanbots has been circulating for some time. Carillion Canada, whose Wolverhampton, England- based parent is a publicly listed company, has not yet published financial details of the acquisition.

Carillion PLC reported revenues of about $8.1 billion last year, and has about $32 billion in orders on its books worldwide and 50,000 employees globally.

Carillion has a massive portfolio that encompasses rail, healthcare, education, regeneration, road, defense, commercial property and facility management and maintenance, infrastructure and financing.

It’s also a major player in European P3 projects (known as PFI or AFP there) such as the Royal Opera House, and the Tate Modern Gallery both in London, the Grand Mosque in Oman, The Copenhagen Metro and the English M6 toll road.

According to its 2007 annual report, support services, P3 and Middle East activities account for 89 per cent of the company’s overall operating profit before taxes of about $200 million, a 39 per cent jump over 2006.

Canadian and Caribbean division activities generated $3.2 billion in revenues in 2007, an increase of two per cent and about 42 per cent of overall revenue, but they weren’t as profitable as other operations, contributing about 10 per cent of pre-tax profit, down 14 per cent from 2006.

In an effort to boost its business in Canada, Carillion needed to acquire the expertise it didn’t already have in place, says Vanbots president and chief operating officer Matt Ainley.

“It’s about going after P3 work,” says Ainley.

“It’s a great fit,” continues Ainley. “We have bid joint venture projects in the past with Carillion, including the Toronto rehabilitation hospital and the Woodstock hospital.

“They don’t have any construction capability and that’s what we bring to the deal.”

He says Carillion’s expertise in facilities management combined with Vanbots’ on-the-ground experience will give the new entity a greater profile and reach in bidding for P3 jobs.

The current credit crunch climate also plays into the marriage, since the global profile of Carillion will help bring development funds to the table in seeking P3 projects.

“I really think we’re the only player in Canada now who can do that and Carillion already has $1.5 billion in financing approvals now,” Ainley said.

“We’re also on the shortlist for Bridgepoint [Health] in Toronto which is a $300 to $350 million project so this will help us there as well.”

The Vanbots brand, prominent in Ontario, B.C. and Quebec, will remain, says Ainley and since the deal seeks to leverage the company’s expertise where Carillion has none, there’s no rationalization or job restructuring expected.

“The management team remains in place here at Vanbots and you will still see the signs on our sites, except now it will say, ‘Vanbots a Carillion Company,’ ” he said.

It’s an acquisition sure to have some ripple effects through the industry, especially if credit gets tighter and banks get more picky about who they lend to because being bigger may mean being a better risk.

Vanbots is one of Canada’s biggest general contractors and has had a hand in many high-profile projects such as the Royal Ontario Museum’s Michael Lee-Chin Crystal, Vancouver International Airport’s expansion and the M Wing expansion at Sunnybrook Health Sciences Centre.

The deal is the latest chapter in the Vanbots story which began in 1955 when two carpenters, Bill Vandergluchf and Bill Bots, formed a partnership to build homes.

Over the ensuing years, ownership of the company has generally passed from owner to former employee until Gillam bought it out and took it from a $20-million-a year-enterprise to over $600 million today.

Ainley joined in 1985 and took an equity position a decade later.

Since then the company has opened offices in Vancouver and through acquisition in 1997 established a strong foothold in Montreal.

In 2002, it became the only non-British company to win the British Construction Industry Building Award based on its work on the Honda plant in Swindon, England.