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North Sea Engineer Wood Group Faces Potential Takeover by Dubai Rival Sidara
Oilfield services provider Wood Group is considering a revised acquisition offer from Dubai-based competitor Sidara, signaling a potential takeover at a significantly reduced valuation. The latest bid values the Aberdeen-based company at approximately £240 million, a fraction of previous offers rejected last year. This development follows a period of financial strain and investor concerns for the North Sea engineer.
Sidara’s Renewed Takeover Approach
The struggling oilfield services provider, John Wood Group, informed investors on Monday about Sidara’s renewed proposal of 35 pence per share. This bid values the entire company at around £240 million. It marks a significant shift from Wood’s previous stance, as they now express willingness to recommend the offer to shareholders.
Background of Previous Bids
Significantly, Wood had previously dismissed three offers from Sidara in the prior year before accepting a fourth proposal valued at £1.6 billion. However, after two months of deliberations, Sidara withdrew its offer, citing increasing geopolitical instability and volatility in financial markets.
Current Offer and Capital Injection
Sidara’s current bid incorporates a potential $450 million capital infusion, structured in two parts. The first tranche of $250 million is contingent upon shareholder approval or the formal offer document release, followed by a subsequent $200 million installment. This financial injection is intended to bolster Wood Group’s capital structure.
Financial Challenges and Debt Refinancing
Wood Group is also exploring options to extend or modify existing debt arrangements, with the majority due to mature in October 2026. The Aberdeen-headquartered company, with a global workforce exceeding 35,000 across 60 nations, has confirmed it is actively pursuing various alternative refinancing strategies.
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Strategic Rationale for Accepting Offer
Following consultations with financial advisors, Wood Group stated that Sidara’s “possible offer represents the better option for Wood’s shareholders, creditors and other stakeholders.” This suggests the company perceives limited alternatives amidst its current financial difficulties.
Market Reaction and Share Performance
Following the announcement, Wood Group shares experienced a significant surge, climbing 13.7 per cent to 28.4p in early trading. This increase positioned them as the top performer on the FTSE 250 Index, reflecting investor reaction to the potential takeover news.
Bleak Financial Outlook
However, the company’s financial forecast for 2025 remains challenging. Wood Group projects lower underlying earnings before exceptional items and anticipates negative free cash flow, estimated to be between -$150 million and -$200 million. These figures underscore the company’s ongoing financial pressures.
Accounting Review and Governance Issues
In late March, Wood Group issued a warning that its annual results publication would likely be delayed. This followed a review by Deloitte which identified “cultural failings” leading to the inappropriate withholding of information from auditors. The probe also uncovered “inappropriate” management pressure to uphold previous financial reports through “unsupported dispensations,” highlighting serious governance concerns.
Company Response and Remedial Actions
Wood Group has asserted that “significant change” has been implemented within the organization since the review. This includes the appointment of new external specialists tasked with assisting in the implementation of rigorous accounting standards, aiming to address the identified shortcomings.
Industry Analyst Perspective
Russ Mould, investment director at AJ Bell, commented on the situation, stating, “Once a big success story in the UK energy industry, Wood Group looks set to succumb to a pretty sorry end.” Mould suggested that shareholders may be inclined to accept the offer, given the company’s recent struggles. He further added, “Beggars cannot be choosers, and such is Wood Group’s perilous position it has little choice but to accept what is on offer, particularly given Sidara is pitching a potential capital injection as part of the agreement,” highlighting the limited options available to Wood Group.
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