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Few outside of the energy industry and Scotland would once have heard of Wood Group. But since the beginning of 2023, the Scottish engineering company, which has struggled to recover from an ill-fated takeover deal, has enjoyed several moments of fame.
First buyout group Apollo turned up with five approaches, although it eventually dropped its pursuit. Now a Dubai-based outfit that once pursued Wood’s Australian rival Worley has the FTSE 250 engineer in its sights.
The departure of Wood would no doubt add to hang-wringing over the state of London’s market. Yet this is a prime example of when take-private deals of struggling companies may be no bad thing.
Sidara has proposed paying 205p a share for Wood, valuing the company at over £2bn when also taking into account net debt forecasts for this year. Previously called Dar Group, Sidara already owns a small energy services company Penspen and is particularly keen on Wood’s business in the US, which accounts for about 35 per cent of revenues.
Sidara’s offer, already rejected, was at a 41 per cent premium to Wood’s average share price over three months. Still, it is 15 per cent below Apollo’s final proposal of 240p, withdrawn almost exactly a year ago. An approach by Sidara at a similar level — which looked high at the time — should be attractive to Wood’s long-suffering shareholders.
True, Wood has made progress on its latest turnaround since Apollo walked away. First quarter ebitda improved 4 per cent despite a 6 per cent year-on-year drop in revenue as it takes on higher margin work.
But it is slow and lumpy. The company on Thursday said that net debt, which totalled nearly $1.1bn at the end of last year including leases, would end 2024 at a similar level. Wood has struggled to delever quickly as promised after its 2017 takeover of Amec Foster Wheeler, which saddled it with both debt and legal liabilities.
Wood had already pushed back by a year when it expected to generate significant positive free cash flow, to 2025. Newly-arrived chief financial officer Arvind Balan, previously finance director of Rolls-Royce’s civil aerospace business, has promised a sharper focus on working capital. Yet the sort of cultural change he envisions takes time.
A figure close to Apollo’s last bid would value Wood at over seven times on a forward ebitda multiple, which looks fair against other European oilfield services groups. Investors’ patience has been sorely tested. They’d be forgiven for pushing for Wood to return to relative anonymity — this time as a private company.
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