Discussions regarding Wood Group takeover have been extended further, due to an ongoing regulatory investigation.
In a dramatic turn of events, private engineering and design firm Sidara has renewed its takeover bid for John Wood Group PLC, following a series of financial setbacks and an ongoing investigation by the Financial Conduct Authority (FCA).
The latest bid, valued at around £240 million, was put forward in April at 35p per share, surpassing an earlier offer made by Apollo Global Management in 2023. However, Wood Group declined the offer without explanation, leading Sidara to walk away from the negotiations in April due to rising geopolitical risks and financial market uncertainty.
The FCA's investigation into John Wood Group, which covers the period from January 1, 2023, to November 7, 2024, was initiated following an independent review announced by the company in November 2024. The specific focus of the investigation has not been disclosed, but Wood Group has committed to cooperating fully with the regulator.
The company's financial woes have been mounting. In February, Wood Group warned that it expected between $150 million and $200 million in negative free cash flow this year. This prediction was followed by the suspension of its shares from trading on the London Stock Exchange due to delays in publishing its 2024 results.
The 2024 financial statement needs to be restated due to 'material weaknesses and failures' in its financial culture, as discovered by a Deloitte probe. This revelation, coupled with the resignation of the company's chief financial officer, Arvind Balan, who admitted to inaccurately describing his professional qualifications, has sent Wood Group's shares plummeting by approximately 84% over the past year.
The legacy claims liabilities totalling about $150 million are also a concern for Wood Group. The company is reportedly considering a potential $450 million capital injection and pursuing an extension or amendment to its current debt facilities to address these issues.
Sidara, founded as Dar al-Handasah in Lebanon in 1956, is a private company with a specialist focus on large-scale building projects, employing about 21,500 people. The company's offer includes the possibility of Wood Group continuing to operate as a standalone entity, providing consultation, engineering, and management services to the energy and minerals sectors, employing 35,000 individuals across more than 60 countries.
The deadline for Sidara to make a takeover offer has been extended until 5pm on 28 July, following a request from Wood Group. The extension follows a City watchdog investigation into Wood Group due to 'cultural failings' with its accounting practices.
As the investigation continues, both parties are expected to engage in further negotiations, with the potential takeover offering a lifeline for Wood Group amidst its financial struggles. The outcome of these discussions remains uncertain, but the renewed takeover bid has certainly added a new dimension to the company's tumultuous year.
Investing in the energy sector may present an opportunity for Sidara, as they renew their takeover bid for John Wood Group PLC, following financial setbacks and an ongoing investigation by the Financial Conduct Authority (FCA). The financial struggles of Wood Group, including material weaknesses in their financial culture, could potentially be addressed through a capital injection or amendments to their debt facilities, as they consider various strategies to manage their legacy claims liabilities.
