Windfall for Wood after £1.75bn deal


Wood Group will return £1bn to investors - including a £250m windfall for its founding family - after the energy services firm sold its pumps business for £1.75bn to deal-hungry US titan General Electric.

Engineers will now be working for the US’s General Electric

Sold: Engineers will now be working for General Electric

Analysts immediately applauded the price for the well support division - whose specialities include wringing the last drops out of 'mature' oil wells - while the markets concurred, sending Wood up 79.5p to 651.5p, a near 14% rise.

The company said it would use around £900m from the deal to keep debt levels down following its yet-to-complete £593m acquisition of PSN, which services Shell's rigs in the North Sea.

But the rest will be returned to investors, who will be asked whether they favour a share buyback, special dividend or another form of cash return.

Major shareholders include the Wood family - including founder-chairman Sir Ian Wood - who will share in a combined £250m, assuming a simple return of cash on their 22% stake.

Chief executive Allister Langlands said the company had invited bids for the division because it had few synergies with Wood's other businesses and had grown as far as it could.

'We reached the position last year where we felt there were now other owners who could add more value,' he said.

'We approached eight people initially and six submitted full bids.' Langlands wouldn't reveal the other bidders, but they are thought to have included US firms Halliburton and FMC. He also signalled that the Aberdeen-based firm would be left with money for acquisitions.

'It's nice to take this chance to renew the firepower on our balance sheet,' he said, admitting an interest in joining in the Brazilian deep water drilling boom and the drive to exploit Canada's oil sands.

Iain Armstrong of broker Brewin Dolphin said offloading the well support business would reduce sensitivity to the oil price, making it more stable, if less likely to benefit from sudden commodity spikes.

'It's a much more predictable earnings stream now,' he said.

For GE, the acquisition is just the latest in a string of oil services deals it has said could reach £19bn in the space of a few years.

The US giant spent £800m on British oil services firm Wellstream last year, as it looks to diversify its income stream in the light of the problems suffered by its financing arm GE Capital amid the depths of the credit crunch.

Washington was forced to insure around £85bn worth of debt at GE Capital, while GE itself was handed a £10bn loan.