The fate of one of Scotland's biggest oil and gas engineering employers could be decided within 48 hours as a Middle Eastern bidder stalks the business amid claims tax increases could lead firms to slash North Sea investment.
Aberdeen-based Wood has spent weeks in talks about a takeover proposal from Sidara, which has until 5pm on Thursday, June 12, to decide whether to make a firm offer.
The 35p per share deal under discussion with Abu Dhabi-based Sidara would value Wood at around £240m.
The outcome of Sidara’s deliberations will be awaited anxiously by staff at Wood, which grew from a fishing business to become a leading player in the global market to help firms develop and operate oil and gas facilities.
Wood employs 4,500 people in Aberdeen and the North Sea operations it runs mainly from the Granite city.
The Put Up or Shut Up deadline for Sidara to make a firm offer has been extended three times since it made an initial approach in February.
Sidara decided to scrap a £1.5bn bid to buy Wood in August last year citing concerns about geopolitical risks and financial market uncertainty.
The group’s decision to return to the fray indicated it saw significant value in the expertise offered by Wood.
The company announced today that it had won a $2.8 billion (£2.1bn) contract to work on a gas processing plant in the United Arab Emirates.
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However, Wood has faced big challenges in recent months.
In February Wood issued a disappointing trading update and announced plans to slash costs to help reduce its debts. The company also revealed that an independent review of its key projects division had identified material weaknesses and failures in respect of financial culture, governance and controls.
Wood subsequently delayed publication of its latest annual results until June 30 citing the timing of the conclusion of the independent review and the extensive work needed to conclude the audit of last year’s numbers.
Against that backdrop, Sidara has likely faced challenges in its efforts to decide on a valuation for Wood.
The task has been complicated by uncertainty about the outlook for activity in the key North Sea oil services markets.
Some firms that operate oil and gas fields have shelved plans to cut investment in new developments and upgrades following the increase in the windfall tax rate in the Budget in October.
Chancellor Rachel Reeves has faced great pressure to reduce the tax burden on the sector in recent weeks while completing work on the Labour Government’s Comprehensive Spending Review. The results of the review will be announced tomorrow.
If Sidara decides to proceed to make a firm offer for Wood there will be mixed feelings in Aberdeen.
Wood chief executive Ken Gilmartin has insisted the company can prosper as an independent.
But he and other directors have said that if Sidara makes a formal offer on the terms under discussion they would be minded to recommend that Wood shareholders accept it.
Sidara has said that it recognises and wants to retain the talent offered by Wood employees. There will still be concern in Aberdeen that jobs will be vulnerable as Sidara looks to maximise the return on any investment it makes.
Meanwhile the loss of another stock-market listed firm would deprive Scotland of valuable professional services work and could leave the country struggling to interest international investors.
