First Reserve buys oil-rig operator Abbot Group

Alasdair Locke, the executive chairman of Abbot Group, was in line for a 93m pay day yesterday after he agreed to sell the FTSE 250 oil-rig operator he founded for 906m to American buyout group First Reserve.

The 390p-per-share deal comes two-and-a-half months after Abbot, the biggest oil-rig contractor to companies operating in the North Sea, first told the market that it had received approaches. The board opened talks with three bidders after its 4 October announcement but yesterday recommended the cash bid from First Reserve. The offer pipped a rival proposal from Candover, the UK private equity firm. 3i, the other bidder, had earlier dropped out of the auction.

First Reserve, a previous backer of Caledonia Oil & Gas, has received irrevocable undertakings from Mr Locke, who holds 13 per cent of Abbot's stock, equal to about 118m under the offer. However, as part of the deal he also agreed to invest 25m into Turbo Alpha, First Reserve's bidding vehicle, and to serve as its executive chairman. That promised investment reduces his windfall to 93m.

First Reserve managing director Will Honeybourne said he planned to work with Mr Locke and the current management to grow the company "more aggressively than they could have as a public company." He said that the emphasis would be on organic growth in the company's current markets, which include the North Sea, the Caspian Sea, Russia, North Africa and the Middle East. He added, however, that buying rivals is also an option. "If you look at our portfolio companies, they have traditionally made a lot of acquisitions and we have some ideas on acquisitions that this company could make."

The deal represents a 34 per cent premium over Abbot's closing share price on 3 October, the day before it said it had received bidder interest. Its shares closed yesterday at 379p.