What’s the deal with Ethos Energy?
Headquartered in Aberdeen with 3,600 staff globally, Ethos is a major Scottish employer focused on manufacturing turbines and other rotating equipment.
The business is a joint venture with Germany’s Siemens Energy, with Wood owning a controlling stake of 51%. The partners have agreed to sell the whole of the business to private investment house One Equity Partners.
Wood expects net cash proceeds of approximately $95m when the deal completes later this year. Wood will also issue a loan note to Ethos that will generate a further $42m plus interest five years after the deal’s completion.
And CEC?
CEC Controls is headquartered in the USA and employs about 220 people globally making systems for industrial and process control.
Wood has agreed to sell its equity in this business to SCIO Automation, a global industrial group based out of Germany. The deal is expected to generate net cash proceeds of roughly $29m upon completion later this year.
Why did Wood lose so much money in the first half of the year?
The group has struggled to cut its borrowing levels since its £2.2 billion acquisition of London-based Amec Foster Wheeler in 2017.
The post-tax loss of £983m included an $815m charge after Wood concluded that some of its businesses would make lower profits than previously expected. Chief executive Ken Gilmartin said the bulk of this related to Amec Foster Wheeler, which was acquired under his predecessor Robin Watson.
Mr Gilmartin described the write-offs as a “tidy-up” process that would not trigger cash charges. He further noted that the group’s order book grew by 4% in the first half to $6.2bn, with the sales pipeline up by 8% in the second quarter.
What about that takeover attempt?
Wood has actually fended off a number of takeover approaches during the past two years, the first being a series of overtures from US private equity group Apollo Asset Management. Apollo eventually abandoned the effort in May 2023, dropping a mooted offer of 240p per share that would have valued Wood at about £2.2bn, including debt.
Sidara, also known as Dar Al-Handasah, began stalking Wood in May of this year but dropped plans to make a 230p per share bid earlier this month after completing due diligence, citing rising geopolitical risks and uncertainty across financial markets.
What are investors saying about all of this?
With regard to the disposals announced today, broker Peel Hunt said the sale price of Ethos represented a lower enterprise multiple of 4.0x than the 6.0x it expected. The sale price of CEC at a multiple of 5.0x was higher than the 3.0x anticipated.
As for the bigger picture, activist shareholder Sparta Capital Management earlier this year called on Wood to “actively seek alternative” solutions to its listing on the London Stock Exchange, where its shares have languished at around 130p since Sidara abandoned its bid. Mr Gilmartin has said this would not be a “cure” for Wood’s problems.