SHARES in WorleyParsons rose to a record after the engineering company agreed to buy Colt Companies for $1.13 billion with the aim of benefiting from increasing investment in Canada's oil sands industry.

WorleyParsons shares jumped $4.70 to $27.30, making the stock the biggest gainer in the MSCI World Index. The increase was the largest gain for the stock since October 11, 2004, after Worley Group agreed to buy Parsons E&C Corp.

Capital expenditure in Canada's oil sands industry may exceed $C125 billion over the next decade based on announced investment projects, WorleyParsons and Calgary's Colt, a project design and construction company, said last week after announcing the agreed takeover.

Canada has the world's second-largest oil reserves, at 179 billion barrels, 98 per cent of which are within oil sands.

"It's a very strong acquisition with a lot of strategic value for Worley in the North American market," said John Grace, who helps manage the equivalent of $5.2 billion at Ausbil Dexia in Sydney, including WorleyParsons shares. "Parsons was a company-transforming acquisition and Colt is very similar for Worley."

WorleyParsons raised about $339 million selling shares to institutional investors to help fund the acquisition, the company said yesterday in a statement.

The company's stock had been halted from trading until then, pending the sale.

The latest gain in WorleyParsons shares is equivalent to an increase of about $967 million in WorleyParsons' market value.

Shares in the placement were sold at $21 apiece to existing institutional investors in an offer underwritten by UBS. Shares that were not taken up in the offer were sold to new and existing investors after a bidding process, at $28 each.

A further $141 million is expected to be raised in a share sale to retail investors, while some of the acquisition will be funded by $333.2 million of debt, WorleyParsons said. About $342 million of stock will also be issued to the vendors of closely held Colt.

"Colt's industry position is quite strong and gives Worley a chance to replicate over in North America what they have here," said Ausbil Dexia's Mr Grace, who took up his full entitlement to new shares. "For Worley, it adds to earnings straight away and that is without even counting any synergies."

Producer interest in Alberta's tar sands, estimated to hold the most reserves outside Saudi Arabia, surged after growing oil demand and political tension in the Middle East boosted crude-oil prices last year. Rising prices are spurring a boom in oil-sands projects, increasing costs as producers compete for equipment.

The purchase would have boosted WorleyParsons' earnings per share in the 12 months ended December 31 by 16 per cent assuming a full-year contribution from Colt, before cost savings or integration charges, WorleyParsons said last week.

Goldman Sachs JBWere increased its discounted cash flow valuation for WorleyParsons stock by 15 per cent to $24.48 as a result of the acquisition, the firm said.

UBS raised its estimate for WorleyParsons 2008 and 2009 earnings by about 22 per cent due to the deal, the bank said in a report last week.

Source: The Sydney Morning Herald,
http://www.smh.com.au/news/business/
worleyparsons-shares-take-off-thanks-to-canadian-oil-sands/2007
/02/14/1171405294034.html