EXOVA, the Edinburgh-based materials testing group, has agreed a £620 million takeover after facing significant challenges amid the downturn in the oil and gas sector in which it does much of its business.

Directors of Exova have recommended an offer for the firm from London-based Element Materials Technology three weeks after the company said it was talking to three potential bidders.

Exova chief executive Ian El-Mokadem played down the likely impact on jobs in Scotland. The company employs around 200 in Scotland in head office functions and laboratories in Edinburgh, Hillington and Aberdeen out of a global total of 4,200.

But the deal will likely see the country lose another of the stock market-listed firms which help maintain the credibility of Scotland as a corporate centre and generate valuable work for advisory firms such as lawyers and accountants.

US private equity firm Clayton Dubilier & Rice will net around £330m for its 54 per cent stake in Exova.

Mr El-Mokadem is in line to receive around £5m for his 2m shares in the company he has run since 2011.

Allister Langlands, the oil services heavyweight who chairs Exova, said the proposed deal would allow shareholders to realise the value of the group’s opportunities with certainty. “This represents a good outcome for shareholders and the combination of Exova and Element creates a global leader in the testing market,” said Mr Langlands who is set to net around £450,000 for his Exova shares.

However, the deal provides a further indication of how tough times in the oil and gas sector are impacting on Scotland.

Explaining the rationale for it in a statement, Exova said the company’s exposure to the oil and gas sector had weighed on its share price. The fall in the crude price since the company listed in 2014 and resulting cuts in activity in oil and gas sector activity have presented significant challenges.

Exova, which tests metals used in oil and gas facilities, has highlighted the effect of cuts in spending in the North Sea .

The company has used acquisitions to diversify to help reduce its reliance on the oil and gas market. However, it said: “Beyond the current financial year and in the event that the Group is successful in completing its current pipeline of anticipated acquisitions, the level of financial leverage within the Group may constrain its ability to finance further material acquisitions with borrowings.”

Exova added that it was unclear when CD&R could sell down its holding in the market.

But Mr El Mokadem dismissed suggestions the proposed takeover was an admission of defeat by Exova. He said: “We have obviously had one headache which has been persistent ... that’s oil and gas but now it’s only nine per cent of sales. The rest of the group has been performing well.”

The takeover should create a really powerful force in the global testing business by combining two complementary businesses. Both firms have oil and gas businesses but Exova will bring expertise in markets such as fire testing to the group.

Mr El Mokadem said it was likely the group would have headquarters in London.

Asked about the potential impact on jobs in Scotland he said there was little overlap between the two businesses. “This is all about growth,” said Mr El Mokadem., adding: “I don’t think colleagues should be that worried about this.”

Private equity-backed Element is offering 240p for each share in Exova. Qualifying shareholders will also get a 2.35p per share dividend for 2016.

The 242.35p per share total represents a 26 per cent premium to the average 192.37p for Exova shares in the year to 24 March.

The deal is subject to shareholder and regulatory approval. Exova shares closed down 2p at 238p.

CD&R bought Exova from Cheshire-based Bodycote for £417m in 2008. It sold some of its holding when the company floated in 2014. The flotation valued Exova at £550m.

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