Engineering giant Wood faces a fresh potential threat to its independence after a significant investor said directors should consider selling the Aberdeen-based firm.
Sparta Capital said the sale of Wood may be the best way to achieve a fair valuation for the business after seeing its shares plunge to near record lows on the London Stock Exchange.
Other possibilities highlighted by Sparta include moving Wood’s listing to the US stock exchange in the hope the firm could achieve a wider following.
However, in a brutal assessment of Wood’s position, Sparta suggested the firm may have to be sold to satisfy investors.
“The disconnect between intrinsic value and the value assigned by the market has never been wider,” said Sparta.
“We believe that it is time to recognise that the next chapter of Wood’s journey could be best supported by different owners, and we urge you to undertake a strategic review and explore the best way to maximise shareholder value, including a sale of the company.”
Sparta said many other investors felt something had to be done about Wood’s share price. The intervention by the firm piles pressure on Wood chief executive Ken Gilmartin as he leads a three-year plan to improve the group’s performance.
Wood faced a takeover bid from US investment giant Apollo last year.
Apollo increased the price it was prepared to pay to £1.7bn after Wood directors said earlier approaches undervalued the firm. However, it decided to walk away in April last year.
Sparta noted that shares in the firm have fallen sharply since.
“We are now one year on from the lapsed bid process with Apollo and 17 months since you announced your strategy refresh,” noted Sparta in a letter addressed to Wood’s chairman Roy Franklin.
“Despite the many operational achievements that you have recorded since then, your shares languish at 130p – 140p, which, with the exception of just one occasion in the last five years, are the all-time lows for the shares.”
Sparta’s move may be regarded with concern in Scotland.
Wood became a leading player in Scotland’s engineering sector after carving out a role as a provider of support services for the global oil and gas industry.
The group employs around 4,500 people in Aberdeen and its North Sea operations. It has a 35,000-strong global workforce.
The company has worked hard in recent years to win work in the emerging low carbon energy sector.
Wood did not comment on the letter sent by Sparta, which would need the support of other investors to force changes through.
In the letter, Sparta said: “We have spoken to many of your existing investors, and there is widespread agreement that something must be done to address the poor share price performance.”
It did not provide further details.
Sparta noted that other firms had moved their primary stock market listing from markets which they decided did not recognise the true worth of their businesses.
“In particular, the US, where Wood’s peers Jacobs and KBR trade, and where you have significant operational and executive presence, would seem a logical potential listing venue,” said Sparta in its letter.
The firm also noted that there seemed to be plenty of funding available for deals that involve investors buying firms listed on stock exchanges and taking them private.
It put the onus on Wood directors to address the share price issue while noting that firms in the UK face a “mid-cap curse”. This has resulted in medium sized operations struggling to attract as much investor attention as bigger corporations.
Wood said last month that it had achieved strong growth in the first year of its new strategy. The company grew revenues by 8% to $5.9bn (£4.7bn) last year, from $5.5bn in the preceding year.
Separately the Aberdeen-based Ashtead Technology energy services group said yesterday that it grew revenues by 51%, to £110m, last year.
Shares in the firm closed down 71p at 687p on the Aim market following a good run.
Shares in Wood closed up 2.1p at 142.5p on the main London market.
Source: The Scottish Herald
