An overseas investor is looking to take advantage of the cheap London market valuations by targeting a FTSE 250 engineering consulting firm.
John Wood Group rejected a £1.4billion takeover offer from a smaller competitor, claiming it “fundamentally underestimated” the engineering consulting firm.
Wood shares rose as high as 20% in early trading following speculation that Sidara was interested in acquiring the company. By closing, the stock had risen by 16.9 percent or 27.9p to 192.9p. This valued the company at £1.3 billion.
Wood confirmed that it received a “preliminary, unsolicited and conditional” offer worth 205p per share. This offer is nearly 15 per cent less than the offer made by Apollo Global Management last year, a US private equity investor.
Wood stated: “The board, along with its financial advisors, carefully considered the proposal and concluded that it fundamentally underestimated Wood and its prospects for the future.” Sidara announced it was “considering” its next steps.
Wood, a company with its headquarters in Aberdeen, listed in London and specializing in oilfield services, has been expanding into new areas of business for several years.
More than 35,000 employees are employed in the engineering and operation projects of this company around the globe, including areas like energy, chemicals and life sciences, minerals, and infrastructure.
In recent weeks, a number of overseas investors have made takeover offers for UK-based companies due to their relatively low valuations compared with those of international peers. STG Partners of California, a private equity firm, made a £147million bid last month for Gresham Technologies. The company builds data management software that is used by clients such as easyJet and M&G Investments.
Spirent Communications was at the heart of a transatlantic battle when it rejected the bid of Arizona’s Viavi in favor of Keysight Technologies.
Darktrace, a Cambridge-based cybersecurity company that joined the London Stock Exchange in 2021, at 250p per share, agreed to a £4.4 billion cash buyout from Thoma Bravo the US private equity group. One City analyst referred to this as a “hammer blow” for the UK stock market.
Dar Al-Handasah was founded in 1956 by professors of engineering from the American University of Beirut. Dar Group was rebranded last year as Sidara, but it remains a design-and-engineering business that is owned by 44 shareholders.
In April, it is believed that Sidara had sold its $1.4 billion stake of Worley, an Australian engineering services company, in a block transaction in preparation for Wood’s approach.
Sidara built the Princess Nourah bint Abdulrahman university in Riyadh (Saudi Arabia).
Sidara was reportedly studying the FTSE 250 offer much earlier. Sidara’s interest in growing revenue in the US is due to the opportunity to increase revenues through oil and gas projects as well as renewable energy, since the Inflation Reduction Act.
Around half of the company’s $2.3 billion revenue is generated in the US where it has its existing energy business. It is believed that a combination with Wood would also offer cost-saving opportunities.
Wood’s largest source of sales is the US, which accounted for nearly a quarter last year.
After a long-term pursuit, Apollo Global Management has decided to abandon a potential £1.7billion deal for Wood valued at 240p per shares after a month-long pursuit.
Sparta Capital is another activist shareholder who has been putting pressure on Wood to consider selling the company or exploring a listing of the shares in the US. This activist suggested last month that the company could explore the possibility of a sale, as well as a possible listing.
Ken Gilmartin is half way through a 3-year turnaround plan and a trading report is due on Thursday.
The annual results for 2023 show a 7.9% increase in revenue, reaching $5.9 billion. A pre-tax loss was $62.7 million. This is partly due to costs associated with the Apollo approach.
This is still better than the $691 Million loss that was expected in 2022.
Gilmartin, in his annual report, upgraded the forecasts for free cashflow and pointed to an increase of 4 percent in the order book value to $6.3 billion.
According to the takeover code of the City, Sidara has until 5pm June 5th to announce its firm intention to either make an offer or to walk away.