Aberdeen energy service giant Wood Group is selling its well-support division to the oil and gas arm of American conglomerate General Electric (GE) for about £1.8billion.
Yesterday’s deal, subject to shareholder approval and anti-trust clearances, came less than two weeks after Wood revealed it was considering the disposal.
Wood Group’s shares jumped nearly 14% to 652p after yesterday’s news broke.
Investors were also boosted by deal terms stating “not less than” £1.1billion of the sale proceeds would come their way.
There are no details yet on how the cash return will operate but the payouts work out at about £2 a share, meaning a windfall of at least £235million for founder and chairman Sir Ian Wood and his family.
It will also mean a change of ownership for an operation employing about 100 people at Peterhead and a further 3,700 at sites in Canada, Australia, Indonesia, Mexico, Saudi Arabia and Venezuela.
Claudi Santiago, chief executive at GE Oil and Gas, said there was no threat to jobs in Buchan because the Wood division and its operations were complementary to the US group’s oil and gas business.
He told the Press and Journal the deal was more likely to lead to expansion at the well-support operations as GE’s technology was applied across products and services, adding: “This is an acquisition more about growth than anything else.”
GE Oil and Gas already employs about 1,200 people in the north-east at Vetco Gray sites in Aberdeen and Montrose.
The addition of Wood’s well-support business will mark the second big acquisition inside three months by the American business.
In December, the group unveiled a deal worth nearly £800million to buy UK-based oil and gas service firm Wellstream Holdings.
Announcing the latest move, Mr Santiago said: “The acquisition is another major step forward for GE Oil and Gas.”
Selling the well-support arm allows Wood Group to pay off debt it took on in the £606million acquisition of smaller rival and fellow Aberdeen company PSN late last year. There will also be plenty left over for acquisitions as the company looks to expand its business globally.
Wood Group chief executive Allister Langlands said: “GE represents an excellent new home for the well-support division.
“The combination is complementary in capabilities and technologies, and will benefit employees, customers and shareholders alike.”
The unit offers services and products aimed at improving production rates and economic recovery from oil and gas reservoirs.
It includes Wood Group ESP, Logging Services and Pressure Control.
During 2010, the well-support operations netted earnings before interest, tax, depreciation and amortisation (ebitda) of £103.6million on revenue of £591.7million.
At December 31, the division had gross assets totalling £377.7million.
The operation is expected to generate ebitda of £124.9million this year, on revenue of £687million.
It had been speculated that the division could go for anywhere between £615million and more than £1.23billion.
The actual figure put even the upper end of that range well in the shade, but GE’s oil and gas chief denied the American group had paid too much. Mr Santiago said: “We feel it is a fair deal and very much in line with the average for other companies in the same space.”