WOOD Group is moving into the US petrochemical engineering sector by acquiring a Texas specialist for up to $192m (£130m) as it looks to reduce its reliance on oil and gas production work amid the crude price plunge.
The Aberdeen-based oil services group has agreed terms to buy The Infinity Group, a Texas-based firm that provides construction and maintenance services in the petrochemical, refining and gas processing sectors.
The company said the acquisition will give its Wood Group PSN maintenance arm a foothold in a market with significant growth opportunities, with the potential to grow the Infinity business across the US.
"The addition of The Infinity Group gives Wood Group PSN service line expansion, sector diversification, and entry into the US petrochemical and other downstream sectors, coupled with access to new clientele," said the chief executive of Wood Group PSN, Dave Stewart.
The acquisition is the second diversification move that Wood Group has made in quick succession, amid signs that the downturn in core oil and gas markets including the North Sea could last some time.
Wood Group laid off 1,000 UK workers in the first half in response to the drop in activity that has been seen in the North Sea since June last year.
In September it bought the Bedfordshire-based Automated Technology Group to help it move into new markets such as car manufacturing and food and drink.
On Wednesday the group announced it had opened a base in Slovakia to help Automated Technology Group target work in the car manufacturing sector in the region.
Noting that Wood’s oil and gas business has been heavily skewed to the upstream exploration and production sector, analysts at Macquarie investment bank said of the Infinity deal: “This looks like a reasonable transaction, and certainly diversification away from the upstream is something that we welcome.”
But they added: "We do not see this as a transformational deal."
Wood already works in the refining and chemicals sectors in the Asia Pacific region.
The Infinity and ATG deals show the oil price slump has triggered a big change in strategy at Wood.
Under chief executive Bob Keiller, the group made a series of acquisitions that increased its exposure to the US shale sector during the boom that ended last year.
It acquired the Elkhorn and Mitchell’s firms in deals thought to be worth around £200m in total.
In its interim results announcement in August, Wood said its onshore US business had been hit by a recent fall in spending on new wells.
The Wood Group PSN arm was led until recently by Robin Watson, who will succeed Mr Keiller as group chief executive after he retires from the firm on 31 December.
Mr Keiller will succeed Crawford Gillies as chairman of Scottish Enterprise on 1 January 2016.
Wood will pay an initial $150m for Infinity, representing 85 per cent of its $176m valuation of the business, which is based on the US firm's trading record.
It will pay up to $192m in total depending on Infinity's performance.
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