Latest interest

Wood rejects £1.4bn offer from Dubai rival Sidara

Wood House
John Wood looks likely to face further offers

Update 9th May: John Wood Group, the Aberdeen-based energy services company, has rebuffed a £1.4 billion ($1.8 billion) offer from Dubai-based engineering company Sidara.

Wood said it had received an unsolicited preliminary approach at 205p per share in cash from the family-owned predator, but after reviewing the proposal with its financial advisers it unanimously rejected it.

The board of the Scottish company said the offer undervalued the company and its prospects, despite representing a 35.5% premium on Wood’s closing price when it was made on 30 April.

Shares in John Wood Group shot up by as much as 26% after a Bloomberg report suggesting Sidara was considering a bid. The shares closed 27.9p higher (+16.91%) at 192.9p.

Sidara has until 5pm on 5 June to decide whether to make a formal offer.

“The board carefully considered the proposal, together with its financial advisers, and concluded that it fundamentally undervalued Wood and its future prospects. Accordingly, the board rejected the proposal unanimously,” the company stated.

Last year, it rejected an approach valuing the company at £1.68bn or 240p per share from private equity firm Apollo which decided not to proceed with a bid.

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

Wood Group’s future “could be best supported by different owners, and we urge you to undertake a strategic review and explore the best way to maximise shareholder value, including a sale of the company,” it said in a letter.

Danni Hewson, AJ Bell head of financial analysis, said: “Setting the pace on the FTSE 250, engineering services company John Wood Group saw shares surge more than 16% on the news that it’s once again come to the attention of a would-be suitor.

“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.”

Trading update

In a first quarter update on Thursday, the company said adjusted EBITDA was up 4% with margin expansion across all business units offsetting lower revenue.

It said this margin performance was helped by both improved pricing and a strategic focus on building a higher quality business, with a move away from EPC work.

Q1 revenue was $1.356 billion, down 6% compared to $1.463bn in Q1 2023, with growth in operations offset by lower revenue in Projects, mainly reflecting lower pass-through activity and lower EPC revenue in line with a strategic shift.

The order book at 31 March was $6.2bn, up 9% compared to March 2023.

Ken Gilmartin
Ken Gilmartin: good progress

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.

“We are progressing with our Simplification programme and have made some significant appointments this year including welcoming Arvind Balan as our new CFO.

“I am proud of the strong leadership team we have in place and confident that we will deliver on our significant potential. We are today reiterating our EBITDA guidance for 2024 and our outlook for 2025.

John Moore, senior investment manager at RBC Brewin Dolphin, said: “Yesterday’s announcement of another rejected bid for Wood was an interesting set up for today’s trading update – particularly in the context of previous private equity bids and shareholder unrest.

“What unites recent events surrounding the company is the belief that a smaller, slimmed down structure is what will help Wood achieve its full potential.

“Today’s update shows some progress in that direction, and the management team is patiently trying to work that out for the company to make sure it is maximising value – while other parties see speedier change as critical.

“As ever, the truth is likely to be somewhere in the middle. Estimates point to an improving earnings picture and Wood’s simplification programme is uncovering savings, but there is more that could be done – regardless of where the company’s future lies.”

Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.