The stock market reaction to news that a long-standing suitor of Wood Group had withdrawn its takeover interest could scarcely have been more emphatic.
Investors sent shares in the Aberdeen engineering services giant tumbling by nearly 40% after Dubai-based Sidara announced it would not be making an offer for the company. It brought to an abrupt end a courtship that began in May and had seen Sidara make four approaches for Wood. The most recent, which came in June and valued Wood at around £1.6 billion – persuaded directors of the Scottish company to engage with the Middle Eastern group.
Having just recently granted Sidara more time to examine the books, through an extension of the “put up or shut up deadline” at the end of July, the fact that Wood’s latest suitor has decided to walk away has disappointed investors. Shares in Wood, which last year was the subject of interest from US investment giant Apollo, had risen sharply since Sidara came on the scene. But after Sidara quit the race, shares in Wood fell today to well below the level they were trading at before the whole episode started.
Shares were trading at 124.8p shortly before 4pm, down 36.65% or 72.2p.
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Sidara cited “rising geographical risk and financial uncertainty at this time” as it declared that it “does not intend to make a firm offer” for the company.
It is certainly the case that the world has become less stable since Sidara first showed interest in Wood. Global stock markets have been in turmoil today as concern grows over the health of the US economy, amid fears it could fall into recession following weak employment and manufacturing data, and tensions are continuing to rise in the Middle East.
Against this backdrop, it is perhaps not surprising that Sidara has decided not to proceed with a firm offer for Wood.
Danni Hewson, head of financial analysis at investment firm AJ Bell, said Sidara’s decision comes after the “global outlook has shifted”.
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“Disappointment coupled with uncertainty sent shares in John Wood Group plunging a whopping 37% as it updated markets that an anticipated takeover by engineering firm Sidara wouldn’t go ahead,” Ms Hewson said.
“The Dubai company had been wooing John Wood for months, with three offers failing to win over the board of the Scottish company.
“But a couple of extensions later Sidara is walking away. 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.”
For its part, the Scottish company said it remains confident in its prospects as it goes it alone and the growth strategy, as it reconfirmed its outlooks for both this year and 2025.
UP Persimmon is expected to signal early signs of optimism for the embattled housebuilding sector this week, after a Bank of England rate cut and the announcement of new Government planning policies.
DOWN The FTSE-100 index at 2:45pm was down 234.66 at 7,940.05.
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