US private equity giant Apollo abandons bid for Wood Group

US private equity giant Apollo abandons bid for Wood Group sending shares in the FTSE 250 engineer tumbling 34.4%

Apollo has abandoned plans to buy Wood Group after pursuing it for four months.

The New York-based private equity giant said it would not make a formal offer for the FTSE 250 group, sending shares in the engineering group tumbling 34.4 per cent, or 75.4p, to 143.6p.

Apollo saw four proposed bids rejected by Wood earlier this year.

But Wood’s board opened up its books last month when the private equity group floated a fifth offer worth 240p a share – or £1.7billion.

Apollo had until tomorrow to table a formal bid. But after weeks of talks, it has walked away, ending its interest in another British firm after casting its eye over everything from ecommerce firm THG to educational publisher Pearson without completing a deal.

Shares hit: Aberdeen-based Wood employs more than 35,000 staff across 60 countries in sectors ranging from US shale to North Sea oil, carbon capture and wind power

Apollo did not go into detail about its decision to abandon the takeover. But a source said it had concluded that a deal was not worth pursuing at the 240p bid price. 

The decision also means Apollo cannot make another approach for at least six months.

Wood’s share price surged in February when Apollo’s approaches to the business were revealed. 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 staff across 60 countries in sectors ranging from US shale to North Sea oil, carbon capture and wind power.

Responding to Apollo’s decision, the group said it remained ‘confident’ in its strategy and prospects, adding that it was ‘well placed to deliver substantial value for shareholders’. 

But some City analysts struck a gloomy tone following the private equity firm’s departure, with broker Jefferies saying the decision was an ‘obvious negative’ for the stock. 

Apollo’s exit is the second for the private equity firm in less than a week after takeover talks with THG collapsed on Friday. 

Its troubles in securing a takeover deal for Wood come despite many London-listed companies suffering from share price discounts, in contrast to their peers in the US, 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 swoop if it did not boost its valuation by buying back shares.

Apollo’s multiple swings at the UK market come as private equity groups look to spend billions in cash built up over recent years as deal-making activity dries up elsewhere in the market.

British companies have come under a barrage of takeover attempts by private equity firms in recent months. 

Credit card payment processor Network International found itself at a centre of a bidding war in April. 

Canadian giant Brookfield Asset Management tabled a £2.13billion offer days after a £2.1billion proposal from private equity group’s CVC Capital and Francisco Partners.

Animal drug-maker Dechra Pharma and smart meter services group Sureserve have also ended up in the crosshairs.

Apollo misses out again 

Apollo has thrown many darts at British businesses – but not many have stuck.

Since 2020, the US private equity giant has bid for or been linked with six listed companies, taking advantage of low valuations after Covid struck. 

But while Apollo has drummed up many headlines and caused much fanfare, the interest often leads to nothing.

As well as walking away from oil engineer Wood Group yesterday, Apollo ended discussions with online retailer THG last week after deciding against upping its offer.

It was the same story with publisher Pearson last year as well as William Hill in November 2020. Likewise, early interest in Sainsbury’s, Morrisons and Boots all failed to lead to anything 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 it is not afraid to enforce capital discipline, preferring to walk away rather than pay more than it wants, thereby diluting the return on investment.’

But others have suggested that maybe its UK office lacks a ‘rainmaker’ – someone who can get a deal over the line.

A source said: ‘Maybe the company is failing to do its homework properly or maybe Apollo lacks a dealmaker – somebody who can convince boards and shareholders that private equity is the right option.’

Apollo last got a deal over the line for a UK-listed company in 2019 when it bought plastic packaging giant RPC for £3.3billion.