Sidara from the UAE and the struggling UK-based Wood Group are looking to extend their deadline for takeover talks. They are waiting for a report on Wood’s governance issues, as well as the auditor’s approval of the company’s annual accounts.
Last year, Sidara backed out of a deal that was valued at around £1.6 billion for Wood. However, they reopened these discussions about a month ago. Wood’s market value has plummeted to about £300 million, following a February update that revealed ongoing cash flow problems and governance shortcomings.
As news of Sidara’s interest came out, Wood’s stock experienced a brief uptick, but that gain has since faded as discussions have dragged on. According to UK regulations, Sidara has until Monday afternoon to make a firm offer or withdraw, unless Wood agrees to extend the deadline. Sources indicate that the two companies are close to finalizing an extension.
This extension would allow time for the results of a governance review by Deloitte of one of Wood’s divisions, along with getting financial sign-off from auditor KPMG for Wood’s 2024 accounts.
While neither Sidara nor Wood Group has commented, it’s worth noting that Sidara is a private network of engineering and design firms, previously known as Dar Al-Handasah, founded in 1956.
Wood Group was once a pride of the UK’s North Sea development, boasting a value of over £5 billion in 2018 as it aimed to transform from an oil service company to a full-scale engineering and consulting firm. However, the situation shifted after its £2.2 billion acquisition of Amec Foster Wheeler in 2017.
In February, Wood acknowledged significant weaknesses in its governance and projected that its cash flow would be negative by up to $200 million this year, contradicting earlier forecasts of positive cash flow. The company’s CFO, Arvind Balan, resigned in February after it was revealed he had misrepresented his accounting qualifications.
Recently, Wood’s stock fell by 13%, closing at 38.4p per share, significantly lower than Sidara’s last offer of 230p per share. Current negotiations between the two companies are expected to reflect the lower shares due to recent trading conditions.
Wood Group is also working with financial advisors while navigating refinancing discussions with lenders, as it aims to refinance $1.4 billion of debt by October 2026. Any future bids are likely to factor in the necessity for the company to recapitalize.