Apollo Management Withdraws £1.7 Billion Takeover Offer for Wood Group

Apollo Management, the private equity firm pursuing a takeover of oil and gas engineering company Wood Group, has abandoned its plans.

Just days before the May 17 deadline to make a firm bid or withdraw, Apollo stated that it would not be making an offer for the Aberdeen-based firm.

Wood Group’s shares plummeted by 41% following the announcement, even though they had seen a surge in value since February due to the takeover interest.

Apollo’s Failed Takeover Attempts

Apollo Management presented five bid proposals to Wood Group, with the fifth proposal valuing the company at around £1.66 billion, offering 240p per share in cash.

The initial four proposals were rejected by Wood Group as undervaluing the company.

However, Wood Group announced last month that it would engage in talks with Apollo following the fifth proposal, after consulting with shareholders.

Wood Group’s Response and Outlook

Wood Group expressed its confidence in the company’s strategic direction and long-term prospects despite Apollo’s decision not to proceed with a bid.

The board believes that Wood Group, following a transformative year that included new executive leadership and a revised strategy, is well-positioned to deliver substantial value to its shareholders.

The company expressed gratitude for the support received from shareholders, customers, and employees throughout the process.

Wood Group’s Background and Debt Reduction

Wood Group has approximately 35,000 employees and specializes in engineering and consultancy for various sectors, including energy, minerals, chemicals, and life sciences.

In an effort to reduce its debt, Wood Group sold its environmental consulting division in the previous year, which resulted in a debt reduction of over £805 million.

Since acquiring Amec Foster Wheeler in 2017 for £2.2 billion, Wood Group has faced challenges related to debt management and legacy lawsuits.

Analysis:

The withdrawal of Apollo Management’s takeover offer for Wood Group represents a significant development in the oil and gas engineering sector.

Wood Group had experienced a surge in share value as a result of the takeover interest, which is now reversed with the announcement of Apollo’s decision.

Wood Group’s rejection of the initial bid proposals and subsequent engagement in talks with Apollo reflected the company’s belief that it was undervalued and its prospects were stronger than what was being offered.

However, with Apollo’s withdrawal, Wood Group must now refocus on its strategic direction and long-term prospects independently.

Wood Group’s ability to reduce its debt through divestments and the appointment of a new CEO highlights the company’s determination to strengthen its financial position and pursue a revised strategy.

The challenges faced by Wood Group, including debt management and legacy lawsuits, have required significant effort and restructuring.

The board’s confidence in the company’s future prospects indicates their belief in the value that Wood Group can deliver to its shareholders.

Moving forward, Wood Group will need to leverage its expertise in engineering and consultancy across various sectors to capitalize on market opportunities and address industry challenges.

The company’s ability to adapt and innovate will be key to its long-term success in an evolving energy landscape.