British oilfield services and engineering firm Wood Group has agreed to extend its takeover discussions with Dubai-based Sidara, allowing time for the completion of an independent review of Wood’s projects division by Deloitte. This extension comes as Sidara faces a UK regulatory deadline to make a firm offer or withdraw, a deadline now deferred due to mutual agreement.
Sidara had previously withdrawn a £1.6 billion bid for Wood Group six months ago, citing rising geopolitical risks and financial market uncertainties. However, negotiations resumed last month, reflecting a renewed interest in acquiring the beleaguered company.
Wood Group has been grappling with significant challenges in recent years. Once valued at over £5 billion in 2018, its market capitalisation has plummeted to approximately £300 million. This decline is attributed to continued cash burn and governance issues, notably highlighted in a February trading update. The company’s financial struggles have been exacerbated by the resignation of Chief Financial Officer Arvind Balan in February, following the revelation of misstated qualifications.
The ongoing Deloitte review and the awaited auditor sign-off of Wood’s 2024 accounts by KPMG are pivotal to the progression of the takeover talks. These assessments aim to address the governance weaknesses and negative free cash flow forecasts that have plagued the company.
Wood Group’s challenges can be traced back to its 2017 acquisition of Amec Foster Wheeler, a move that has since been viewed as problematic. The company has also been under pressure from activist investors to consider a sale, having faced two unsuccessful takeover proposals and a comprehensive review of its financials.
In parallel with the Sidara negotiations, Wood Group is engaged in refinancing discussions for $1.4 billion of debt due by October 2026. Any potential bid from Sidara is likely to involve addressing these recapitalisation needs.
