Wood Group soars after $2.8bn sale

SHARES in oils services business John Wood Group rose more than 14 per cent yesterday after it sold its well support unit to General Electric for $2.8bn (£1.75bn).

The sale was labelled “top dollar” by analysts as the price was substantially over estimates of $1.5-2bn.

Aberdeen-based Wood Group’s shares gained 14.06 per cent to 652p after the company said it would return $1.7bn of the proceeds to shareholders and use the rest to pay down its debt, estimated at $1bn.

Chief executive Allister Langlands said the price reflected “the significant investment programme in well support over the years” and GE would “accelerate the future international growth of the business.”

Sources told City A.M. a number of bidders had pursued the deal. That interest and GE’s ability to pay extra for the synergies with its own business pushed the price up to almost 17 times the unit’s’ core earnings.

The Well Services business employs 3,800 people and generated sales of $947m in 2010. GE snapped up the division to gain expertise in unconventional fuels, such as shale gas, and extraction of more oil from existing wells, where demand is set to grow fast as production from current wells declines at six per cent per year.