- Private equity firm made five offers
- Withdrawal follows snub by THG last week
- Investors see bid premium evaporate
For the second time in as many weeks, global private equity investor Apollo Asset Management has ended talks with a UK target, this time Scottish-based oil and gas engineering and services firm John Wood Group (WG.).
Shares in Wood Group fell as much as 40% from their previous close of 219p before stabilising down 77p or 35% at 142p on heavy volume.
WHY DID TAKEOVER TALKS FINISH?
Last week, online consumer brands group THG (THG) rebuffed an approach by the $600 billion investment giant but this week it seems the New York-based firm took the decision to step away itself.
Having had its four previous approaches rejected by Wood Group’s board, Apollo made a fifth and final offer at the beginning of April pitched at 240p per share subject to ‘satisfactory completion of due diligence’ and with the proviso it could raise or lower the price.
The offer represented a premium of almost 60% to the closing price on 21 February, the day before Wood Group revealed it had received previous offers, and valued the business at $2 billion or £1.66 billion.
After consulting with major shareholders, the UK firm, which had been reluctant to open its books, agreed in mid-April to grant Apollo access to the due diligence materials it had requested.
At the same time, the board insisted it was confident in the company’s ‘strategic direction and long-term prospects following a transformative year in 2022’ which included the sale of its built-environment consulting business for $1.9 billion and a reduction in its debt pile.
However, having looked at the books, in a surprise move Apollo has decided not to pitch a lower offer but to abandon talks altogether and presumably look for another target.
The news will be a blow to US investment firms Fidelity and Franklin Templeton and UK asset managers Liontrust (LIO) and Schroders (SDR), as well as funds and investment banks involved in ‘special situations’ and merger arbitrage.
BACK TO SQUARE ONE
In response, Wood Group’s board reiterated its earlier comment that it was confident in the firm’s long-term prospects and said it was ‘well-placed to deliver substantial value for shareholders’.
It added there had been ‘good momentum across all business units’, as flagged in last week’s trading update, and expectations for the full year remained unchanged.
Given that before the announcement in February of Apollo’s previous approaches the group’s shares had lost more than 80% of their value from their 2017 peak of around 900p, shareholders will be bitterly disappointed a deal couldn’t be struck.
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