US private equity giant Apollo abandons bid for Wood Group
US private equity giant Apollo drops bid for Wood Group, sending shares in FTSE 250 engineer plummet 34.4%
Apollo has been chasing plans to take over Wood Group after four months.
The New York-based private equity giant said it would not make a formal offer for the FTSE 250 group. shares in the technical group, 34.4 percent, or 75.4p, fell to 143.6p.
Apollo saw four proposed bids rejected by Wood earlier this year.
But Wood’s board opened the books last month when the private equity group made a fifth offer worth 240 pence per share – or £1.7 billion.
Apollo had until tomorrow to make a formal offer. But after weeks of talks, it has walked away and ended its interest in another British company after eyeing everything from e-commerce company THG to educational publisher Pearson without closing a deal.
Shares hit: Aberdeen-based Wood employs more than 35,000 people in 60 countries in industries ranging from US shale to North Sea oil, carbon capture and wind energy
Apollo did not elaborate on its decision to forego the acquisition. But a source said it had concluded a deal was not worth pursuing at the 240p bid price.
The decision also means that Apollo will not be able to take any new approach for at least six months.
Wood’s share price rose in February as Apollo’s approach to the company became known. But after yesterday’s plunge, the stock has erased nearly all of the gains made so far this year.
Aberdeen-based Wood employs more than 35,000 people in 60 countries in industries ranging from US shale oil to North Sea oil, carbon capture and wind energy.
Responding to Apollo’s decision, the group said it remained “confident” in its strategy and outlook, adding that it was “well placed to deliver substantial shareholder value.”
But some City analysts struck a sombre tone after the private equity firm’s departure, with broker Jefferies saying the decision was a “clear negative” for the stock.
Apollo’s departure is the second for the private equity firm in less than a week after takeover talks with THG fell through on Friday.
The difficulties in securing a takeover deal for Wood stem from the fact that many London-listed companies suffer from share price discounts, unlike their US counterparts, leaving them vulnerable to opportunistic bids.
The engineering firm itself was warned in December by activist shareholder Sparta Capital that it would be vulnerable to a takeover attempt if it did not raise its valuation by buying back shares.
Apollo’s many swings in the UK market come as private equity groups look to spend billions of cash accumulated over the past few years, while deal-making activity dries up elsewhere in the market.
British companies have fallen victim to takeover attempts by private equity firms in recent months.
Credit card payment processor Network International found itself at the center of a bidding war in April.
Canadian giant Brookfield Asset Management submitted a £2.13 billion offer days after a £2.1 billion proposal from CVC Capital and the private equity group’s Francisco Partners.
Veterinary drug manufacturer Dechra Pharma and smart meter service group Sureserve have also come into view.
Apollo misses again
Apollo has thrown many darts at British companies, but not many have stuck.
Since 2020, the US private equity giant has bid for or been linked to six publicly traded companies, taking advantage of low valuations after Covid hit.
But while Apollo has made headlines and created much fanfare, the interest often goes nowhere.
In addition to walking out of oil engineer Wood Group yesterday, Apollo ended talks with online retailer THG last week after deciding not to raise its offer.
It was the same story with publisher Pearson last year and William Hill in November 2020. Likewise, the early interest in Sainsbury’s, Morrisons and Boots all led to nothing concrete.
Sources close to Apollo say it refuses to overpay for assets. Graham Simpson, the head of Canaccord Genuity’s Quest Research, said: ‘Apollo has shown that it is not afraid to enforce capital discipline and would rather walk away than pay more than it wants, reducing the return on investment.’
But others have suggested that the UK office may be missing a “rainmaker” – someone who can push a deal through.
A source said, “Maybe the company isn’t doing its homework properly or Apollo is missing a dealmaker – someone who can convince boards of directors and shareholders that private equity is the way to go.”
Apollo last got a deal for a British public company in 2019 when it bought plastic packaging giant RPC for £3.3 billion.