Shares in oil services and consulting firm Wood Group (WG.) slumped 38% to 122.3p on Monday after Sidara terminated takeover talks, the suitor citing ‘rising geopolitical risks and financial market uncertainty’ for its decision not to make a firm offer.

Aberdeen-headquartered Wood had rejected Sidara’s previous buyout attempts on valuation grounds and the Dubai-based engineering and consulting firm had until Friday 9 August to make a firm offer or walk away for at least six months.

Sidara - or to give the firm its full title, Dar Al-Handasah Consultants Shair and Partners Holdings - lodged an initial approach to Wood Group on 30 April with an offer of 205p per share, which it subsequently raised twice in mid-May to 220p.

TAKEOVER KIBOSHED BY TURMOIL

Wood agreed to hold talks following Sidara’s fourth and final offer of 230p per share, which was submitted on 29 May and represented a 52% premium to the closing price the day before it made its first approach.

But Sidara, which boasts revenues of $2.8 billion and extensive operations in the US, EMEA and Asia, has blamed ‘rising geopolitical risks and financial market uncertainty at this time’ for its decision not to proceed with the takeover.

The withdrawal of the offer comes at a time of market turmoil triggered by soft US economic data, which has heightened fears of a recession in the world’s biggest economy, as well as simmering tensions in the Middle East.

WHAT DID WOOD GROUP SAY?

Responding to Sidara’s statement, Wood Group insisted the board remains ‘confident in Wood’s strategic direction and fundamental prospects. As set out in the HY24 trading update on 11 July, the growth strategy continues to deliver, with further growth in EBITDA (earnings before interest, tax, depreciation and amortisation), margins and order book in the first half.’

Wood Group added: ‘As we look ahead, we remain focused on delivering our potential, including generating significant free cash flow next year. We are pleased to reconfirm our outlooks for both this year and 2025.’

AJ Bell head of financial analysis, Danni Hewson pointed out that ‘the global outlook has shifted, market volatility has gripped investor sentiment and Sidara might well be breathing a sigh of relief that the lengthy courtship ended as it did, when it did. Companies are battening down the hatches as they consider the state of the world and prepare to ride out the potential storm.’

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.

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