IT was impossible not to feel a sense of relief upon hearing that US private equity outfit Apollo would not, after all, be making a takeover offer for Aberdeen oil services company John Wood Group.
This may well not have been an emotion felt by many investors in Wood, as the company’s share price tumbled in the wake of the news on Monday morning.
The sense of relief related not entirely to Wood but also to the broader context of the importance to Scotland and its economy of having enterprises of the scale and vintage of the Aberdeen group as publicly quoted companies.
So many big Scottish names have disappeared over the years from the stock market screens, with suitors sometimes taking advantage of a period of share-price weakness in these takeovers.
Wood has certainly suffered such weakness in recent years.
And it is perhaps notable the company, which has taken significant steps to diversify beyond oil and gas into other areas amid the energy transition, highlighted the influence of shareholders when it last month announced its decision to open its books to Apollo. This move was aimed at enabling the US player to make a formal offer. As revealed on Monday, such an offer never materialised.
Wood’s shares leapt after it revealed in February that it had received bid approaches from Apollo. However, take a look back over the years on the share-price graph and the steep longer-term fall is clear.
The latest Apollo bid approach had been pitched at 240p a share (or around £1.7 billion in total). In 2011 and in 2013, to take a couple of high points, Wood shares traded above 900p. And they traded close to 900p as recently as January 2017.
Wood shares last night closed at 139p.
READ MORE: Ian McConnell: This crucial SNP policy is definitely for the good of Scotland
In a broader context, sterling’s post-Brexit weakness has made it much cheaper for overseas players to buy up UK companies in any case. This is a most lamentable situation. As a result of hidebound ideology, the Brexiters, supposedly so passionate about Britain, have helped put more of the country’s companies in the bid sights of overseas players with the tumble in the pound arising from the European Union departure folly.
On June 23, 2016, just ahead of the EU membership referendum result becoming clear, the pound was trading above 1.30 euros. It was late yesterday afternoon trading around 1.15 euros.
Against the greenback, sterling was on June 23, 2016, trading close to $1.50. It was trading around $1.24 late yesterday afternoon.
Wood’s share price, relative to where it was as recently as 2017, might suggest management faces considerable challenges in satisfying shareholders.
In April, the Scottish company’s board made no bones about “feedback” from shareholders having been a key factor in its granting of access to “due diligence materials” to Apollo. At the same time, Wood’s board emphasised its confidence in its "strategic direction and long-term prospects" and hailed 2022 as a "transformative" year.
The Aberdeen group continued to voice its board’s confidence in its strategy on Monday, after Apollo walked away.
It said: “The board remains confident in Wood's strategic direction and long-term prospects and believes that, following a transformative year in 2022, including new executive leadership and a new strategy, Wood is well placed to deliver substantial value for shareholders.”
READ MORE: Ian McConnell: Braverman's terrifying speech confirms simple truths
The group added: “The board is grateful for the substantial engagement of its shareholders and the support of its customers and employees throughout this process. The management team looks forward to continuing to deliver against the strategy set out in November 2022.”
It noted that, as laid out in its first-quarter trading update on May 11, “there is good momentum across all business units which has continued since the end of Q1, with expectations for the full year unchanged”.
Wood noted its medium-term targets set out in November 2022 are to deliver growth in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) at a mid to high single digit percentage compound annual rate, “with momentum building over time”, and to return to positive free cash flow in 2024.
Over the protracted period of months during which Apollo was courting Wood, there appeared to be no sign of any rival bidders.
From the Scottish economy’s perspective, the ideal scenario would be that Wood performs well, through growth rather than short-term cost-cutting that might have a detrimental impact on employment, and that such success feeds through to the share price in a way that benefits investors and helps the business remain independent.
READ MORE: Denial after denial from brass-necked Tory arch-Brexiter
Who knows what will happen next though? The current share price reflects stock market players’ view of the value of the company at the moment. At last night’s closing price, Wood’s stock market worth is about £962 million.
In a general sense, what is clear is that it is a very good thing for Scotland to have large publicly quoted companies firmly based here, with the major decision-making taking place north of the Border.
In recent times, we have seen Scottish temporary power specialist Aggreko and transport company Stagecoach taken over.
Go back through the decades, and a raft of big household names including ScottishPower, Scottish & Newcastle, Kwik-Fit, and Stakis have been acquired. Scotland used to be the firm base of two big independent Edinburgh-based clearing banks, in Bank of Scotland and Royal Bank of Scotland. Bank of Scotland is now part of London-based Lloyds and Royal Bank has been renamed NatWest and is run by chief executive Dame Alison Rose from London.
Companies of real scale to replace those acquired or otherwise lost as publicly quoted companies based in Scotland have unfortunately been rather thin on the ground.
So it is good, from a Scottish perspective, to see Wood retain its independence, at least for now. It will most likely be to some extent up to the management to show the benefits of the strategy in which it has faith, if it wants to continue to try to deliver on this as an independent entity.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereLast Updated:
Report this comment Cancel