GE strikes $2.8bn deal for John Wood unit
Tuesday 15 February 2011
The oil services group John Wood has struck a deal to offload its well support unit, netting $2.8bn by selling the division to the US industrial giant General Electric.
The deal is the latest in a string of acquisitions for the US group and comes less than a fortnight after John Wood confirmed it was looking into a possible sale of the division, which helps explorers and producers to improve production rates from oil and gas wells.
Besides unveiling the sale, the FTSE 250-listed group said it would return not less than $1.7bn to shareholders, with the details due to be announced following completion of the deal. The move was well received, with John Wood's shares rising by nearly 14 per cent or 79.5p to close at 652p last night.
Analysts also welcomed the deal, with Evolution Securities saying the price was "well above the top end of the expected range". The broker added that the deal would enhance this year's earnings and "transform the balance sheet which had geared up in December" when John Wood acquired PSN, a smaller oil services business.
John Wood's chief executive, Allister Langlands, said the price tag reflected the division's expertise, and the significant investment that the group had made in the unit over the years. "GE will be a good owner of the business and, with its scale and reach, be able to accelerate the future international growth of the business," he added.
The deal comes on the heels of GE's successful pursuit of Wellstream Holdings, the flexible pipe manufacturer that was sold for $1.3bn at the end of last year. Shortly before swooping on Wellstream, the US group, led by chief executive Jeff Immelt, bought Dresser, another oil field services business, in a $3bn transaction in October.
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