Scottish energy services giant Wood Group’s £606million acquisition of smaller rival PSN is expected to lead to a jobs boost for Aberdeen.
Bob Keiller, chief executive of PSN, said yesterday the creation of the world’s leading production services business would be “fantastic” for the Granite City, the north-east and Scotland.
He added: “This is all about creating something that can grow. There will be no negative impact on jobs. It will lead to more jobs for Aberdeen down the line.”
The deal, exclusively revealed by the Press and Journal yesterday, is Wood’s largest acquisition to date and is also the biggest takeover involving two Granite City companies.
Wood’s production facilities division will merge with PSN, resulting in a unit employing more than 22,000 people worldwide.
The total workforce of the group will jump to around 38,000 when PSN’s 8,500 staff are added in.
All the PSN bosses are staying on, with Mr Keiller to hold the chief executive position in the enlarged division. His deputy will be Les Thomas, currently chief executive of Wood Group Production Facilities.
Both men will sit on the Wood board.
Mr Keiller said the feedback on the deal from clients had been “pretty positive”.
Allister Langlands, chief executive of Wood, said: “Wood Group PSN will have a larger footprint, deeper resources and capabilities and, by selecting best practices, be able to deliver additional added value to our customers.
“The combined business will be better positioned to help tackle current key industry issues, including operational assurance, competency, reliability and asset integrity.”
Mr Keiller added: “I believe that, by uniting PSN with Wood Group Production Facilities, we have a unique opportunity to grow our business to benefit our customers and our people.
“Since the PSN management buyout in 2006, we have achieved significant success and expansion.
“This transaction positions us for the next stage of PSN’s development.”
Wood said the acquisition was subject to relevant anti-trust approvals and completion was expected in the second quarter of 2011. Until then, both Wood and PSN will continue to operate as separate entities.
Wood said its other businesses in engineering, well support and gas turbine services will be unaffected by the acquisition.
Alec Carstairs, oil and gas transactions senior partner for Ernst & Young, which represented PSN in yesterday’s transaction, said: “It is a landmark day, not only for Aberdeen, but for the entire UK oil services industry.
“The deal struck between Wood Group and PSN coupled with General Electric’s takeover of Wellstream highlights the buoyancy of the oil & gas mergers and acquisitions market.”
Law firm McGrigors has been advising PSN management since its formation.
Corporate partner Rosalie Chadwick said of yesterday’s deal: “This is a strong endorsement of the oil services market in challenging economic times. PSN management have built a global business and the new combination with Wood will create a global market-leading production services business with its HQ in Aberdeen.”
Wood said the acquisition of PSN was being financed by a combination of bank debt and new Wood shares.
Bank debt will make up most of the total, with the other £50million in shares.
Lloyds Banking Group has supported Wood in the deal with a flexible financial package.
Alasdair Gardner, managing director of Lloyds Banking Corporate Markets Scotland, said: “We have been a material funder of Wood Group for over 15 years and know the business and management well. This demonstrates our strong appetite to provide strategic debt solutions for our customers. Lloyds Banking Group is pleased to support such a major global PLC in its strategic plans with an acquisition of another high profile, successful, global business.”
PSN’s top bosses will share around £150million in Wood shares and cash.
Mr Keiller has the biggest individual stake among the executives and he is in line for about £40million.
Chief financial officer Duncan Skinner stands to gain nearly £28million and five other directors – Peter Brown, Ali Green, Zeffrey Lucas, Jerome Lynch and Bill Nicholson – could each get about £16million.
PSN was formed in 2006, when management of KBR Production Services took ownership of the operation. The unit was sold to its bosses by Halliburton in a deal worth more than £150million. Shares in Wood ended yesterday at 521p, up 7% or 32.80p