Timber! Will the Wood Group fall?

Wood Group, a British energy engineering goliath operating in over 60 countries, has seen its valuation tumble to less than £200m this month, down from its nearly £5bn valuation in 2016 and down 90% from its value towards the beginning of 2020. 

Wood Group stock price, 6 months. Source: Google Finance

It is safe to say that Wood Group has been running into issues for some time now. It was only less than a year ago that they shed two branches of their tree, selling off their stakes in Ethos Energy and CEC controls. This had been part of a plan to reorganise and refocus by ditching subsidiaries that are not part of their core operations.

Wood Group also experienced pressure from investors to move the company’s listing to New York, where investors hoped to attract more capital and prick the ears of the wider US market. In particular, Sparta Capital said last year that Wood should “actively seek” to list itself elsewhere. 

However, this has been repeatedly ruled out by Ken Gilmartin, Wood’s Chief Executive since 2022, who says that fleeing to New York would not “Cure” Wood’s catalogue of problems. 

More recently, Wood has begun pruning its assets again, pledging to sell off as much as $200m in assets to remedy its proportionally negative cash flow. This was received poorly by the markets, with shares slumping 34% in response.

Unfortunately, the grass isn’t much greener on the side of debt. Wood’s debt towers at over $1bn, with some loans maturing as early as 2026. Wood reassures investors that they are pursuing “refinancing options”, but the outlook is still bleak.

It may be too early to shout timber though, as the Wood Group has been approached by UAE-based Sidara for a buyout proposal.

Sidara has previously approached Wood for a takeover which fell through due to “financial and geopolitical risk”, according to Sidara. 

However, this time seems to be slightly different as Sidara has expressed a desire to move quickly to ensure retention of senior management. This sentiment has been recognised by the market as Wood’s shares rose over 40% on Monday after Sidara’s interest was reported. 

Wood Group stock price, 5 days. Source: Google Finance

Despite this renewed investor energy, it is impossible to be certain that a takeover comes to fruition. The FT similarly reports that people within the talks have been clear that there was “no certainty an offer would be made”.

Under UK regulation, Sidara has until March 24 to announce its intentions. 

With all of its chopping and pruning in recent years, Wood has looked more and more like a flagging company. However, Sadara’s takeover offer creates a chance for the once-great Wood Group’s potential to be renewed and explored.

The clock is ticking, under a month remains for a deal to be reached with.