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Wood Group, the embattled oil services and engineering company whose valuation plunged to less than £200mn this month, has entered takeover talks with the United Arab Emirates-based company that approached it with a £1.6bn buyout proposal last year.
Sidara, which walked away from an earlier takeover attempt last August, made a fresh approach following the collapse in Wood’s share price in recent weeks, according to two people close to the discussions.
The talks over the future of Wood — once the big homegrown success story of the UK’s development of the North Sea — were ongoing on Monday morning but it was possible no deal would be concluded, the people said.
Wood’s shares rose almost 37 per cent on Monday after the Financial Times reported Sidara’s interest.
The increase pushed the group’s market capitalisation to just over £240mn, still only a fraction of the approximately £1.6bn Sidara had offered less than a year ago.
The shares had plunged more than 60 per cent earlier this month amid questions over the Aberdeen-based operator’s governance and heavy debt load.
Sidara, a privately held network of engineering and design companies run from the UAE, was keen to move quickly to ensure it could retain senior and mid-ranking Wood staff who have been angered by the company’s plight and its decision to cut bonuses, according to the people with knowledge of the talks. The people did not disclose the terms of a potential deal.
Following the FT’s report Wood confirmed it had received an approach from Sidara over a possible offer for the entire group, adding that there was no certainty an offer would be made.
Under UK takeover rules, Sidara has until March 24 to announce a firm intention to bid or walk away.
Sidara did not immediately respond to a request for comment. A person familiar with the group’s thinking said it had a “strategic conviction” regarding Wood’s business but remained wary of the risks involved.
The slump in Wood’s share price has raised questions about the future of the operator, which grew out of a family fishing business under the leadership of Sir Ian Wood, turning him into one of Scotland’s wealthiest men.
He left the group in 2012 after selling down the majority of his family’s shares and is estimated to retain a fortune of more than £1bn.
The company, valued at more than £5bn around the time of its £2.2bn takeover of engineering rival Amec Foster-Wheeler in 2017, said this month that an independent review had unearthed “material” weaknesses in the financial and governance culture at its projects business.
Chief executive Ken Gilmartin said at the time that he was “disappointed” and would look to sell assets to boost cash flow.
By October next year it faces the expiry of about $1.4bn in various debt facilities, and the collapse in its share price has made a large equity raise extremely challenging.
Last week Wood’s chief financial officer, Arvind Balan, stepped down after admitting to misstating his professional qualifications.
His departure added to the crisis facing Wood, which is one of the biggest employers in Aberdeen, a city already reeling from declining North Sea output and the UK government’s block on future hydrocarbon developments.
Wood has explored other options including a possible break-up of the business led by the sale of its consulting arm, according to two people familiar with the talks.
The people said the consulting business could be valued at more than £1bn, enough to right-size the parent company’s debt load now that an equity raise would be challenging.
But the board’s preference was to sell the entire company, two people familiar with the talks said, putting Sidara in pole position.
Sidara was formerly known as Dar Al-Handasah, which was founded in 1956.
Private equity firm Apollo, which tried to buy Wood for £2.2bn in 2023, is not expected to pursue a rival bid this time, according to people close to the company.
Wood, which employs 35,000 globally, remains one of a handful of oil services companies capable of handling the large-scale projects favoured by the biggest oil multinationals.
With the exception of BP and Shell — already well-established multinationals before the UK’s development of the North Sea — Wood was one of the few domestic groups in the sector that went on to develop a global footprint.
Additional reporting by Alexandra Heal in London
