Bid interest

Sidara considering higher offer for Wood Group

Wood Group solar
Wood Group could be plunged into a bidding war

The Middle East engineering and design group pursuing Wood Group is expected to mount a higher offer after an approach last month was rejected by the Aberdeen-based company.

Analysts believe Sidara’s 205p-a-share proposal issued on 30 April will be hiked to a price that will appeal to shareholders in the FTSE 250 energy services company.

Wood confirmed the approach last week and that it had rejected it on the basis that it “fundamentally undervalued Wood and its future prospects”, despite it representing a 35.5% premium on Wood’s closing price on 30 April.

Wood’s shares closed at 195.8p on Friday, giving it a market value of £1.35 billion, but suggesting a new offer will not be substantially higher.

Sources do not expect it to be near the 240p-a-share that the Wood board rejected from buyout fund Apollo last year before it ended its interest.

It is possible, however, that Apollo may rekindle its interest, sparking a bidding war for Wood run for many years by north east businessman Sir Ian Wood.

Under takeover rules, Sidara has until 5 June to announce its intentions.

Hedge fund and activist shareholder Sparta Capital Management last month urged the engineering giant to consider selling itself.

Following confirmation of the recent offer, Danni Hewson, AJ Bell head of financial analysis, said: “The fact the offer from Dubai-based Sidara ‘fundamentally undervalued’ the company and was summarily rejected will only pour more fuel on speculation that the business may not hang around London markets for long either.

“Activist investors have been pushing for change and the share price moves today suggest investors expect Sidara could sweeten the pot, or former suitor Apollo might take another look.”

In a trading update last week, Ken Gilmartin, CEO, said: “We are now in the second year of our growth strategy and are making good progress, with EBITDA growth, margin expansion and an order book 9% higher than a year ago.

“We continue to win exciting and complex work across energy and materials, with sustainable solutions representing 40% of our pipeline.

“I am proud of the strong leadership team we have in place and confident that we will deliver on our significant potential.”

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