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Wood Group, the embattled oil services and engineering company that was once the big homegrown success story of the UK North Sea, has entered talks with Sidara about a potential takeover by the United Arab Emirates-based company.
Sidara, which walked away from an earlier takeover attempt in August last year, has 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 were ongoing on Monday morning but it is possible no deal will be concluded, the people said.
Wood’s shares rose 12 per cent on Monday after the Financial Times reported Sidara’s interest.
The increase to the group’s market capitalisation to just over £200mn is still only a fraction of the approximately £1.6bn Sidara had offered less than a year ago.
The shares have plunged more than 50 per cent this year 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.
A spokesperson for Wood declined to comment. Sidara did not immediately respond to a request for comment.
The slump in Wood’s share price has raised questions about the future of the operator, which has been synonymous with the UK’s development of the North Sea and the fortunes of one of Scotland’s richest men, Sir Ian Wood.
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 shortly after the FT approached the company with questions about the veracity of his claimed chartered accountancy qualification. Balan admitted he had misstated his qualifications.
His departure added to a sense of crisis surrounding a company that is one of the biggest employers in Aberdeen, a city already reeling under declining output from the North Sea and the UK government’s block on future hydrocarbon developments.
Wood has explored other potential 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 that business’s annual revenues could value it in excess of £1bn, enough to right-size the parent company’s debt load now that an equity raise would be challenging.
But the board’s preference is to sell the company intact, 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.
Additional reporting by Simeon Kerr in Edinburgh and Alexandra Heal in London
