Shock in the Stock Market: Sidara Withdraws Acquisition Offer for John Wood Group

The British engineering service provider John Wood Group experienced a massive slump in its stock price of nearly 40 percent on Monday after Dubai-based company Sidara announced its decision to abandon its plan to acquire the company. Sidara, also known as Dar Al-Handasah, stated that geopolitical risks and uncertainties in the financial markets were decisive factors in its decision to refrain from making an offer for the London-listed and Aberdeen-based John Wood Group. This withdrawal caused Wood's shares to fall by 39 percent to 120 pence by late morning in London. Just a week earlier, both companies had decided to extend talks about a potential deal. Wood had previously rejected three takeover attempts from Sidara, a Dubai-based company. In early June, Wood agreed to enter negotiations with Sidara following a "final" offer of 230 pence, up from an initial offer of 205 pence. Previous offers were dismissed due to the significant undervaluation of Wood. "In light of the current increasing geopolitical risks and financial market uncertainties, Sidara does not intend to make a firm offer for Wood," the privately held company stated without further details. The failed acquisition attempt is one of the first casualties of the volatility in global markets triggered by concerns about a potential recession in the US. About two years ago, another takeover attempt fell through: In May 2023, private equity firm Apollo Global decided against a 240 pence per share offer, which would have valued Wood, including debt, at about £2.2 billion. The John Wood Group confirmed that its Dubai-based partner had informed the board on Monday morning, following the completion of due diligence on Friday, of its decision not to make an offer. The Wood board, currently implementing its own turnaround strategy, remained confident about future business prospects and strategic direction. "Looking ahead, we remain focused on realizing our potential, including generating significant free cash flow next year," it stated. Founded in 1982 by Scottish billionaire Ian Wood, the company is under pressure from investors, including activist investor Sparta Capital Management, to boost the share price either through a sale or by switching its stock market listing to New York. In a trading update last month, Wood reported that the simplification program led by CEO Ken Gilmartin had already secured about $25 million of the targeted annual savings of around $60 million by 2025. The company expects an increase in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 4 percent in the first half of the year, which is expected to be achieved by focusing on higher-margin projects that would compensate for lower revenues.