Wellstream confirmed yesterday it has received several takeover approaches after speculation about a deal had led to share-price gains earlier this week.
The oilfield services group issued a short statement to the London Stock Exchange saying that it was in initial talks with a number of suitors. The statement followed yesterday's Market Report in The Independent which noted that the group's shares were up on renewed rumours of a bid.
Several names have already been mooted as potential buyers. Hunting and Wood Group, both UK oil services companies, refused to comment, although Hunting was being widely touted as a bidder by traders on Monday.
Wellstream's shares jumped by 29 per cent to 785p yesterday, while Hunting rose by 3 per cent to 641.5p and Wood put on nearly 7 per cent to 416.2p. Wellstream specialises in making flexible pipes used in deep-water oil drilling, and counts Brazil's Petrobras as its biggest customer. Wellstream's proximity to the Brazil market, which has large quantities of untapped oil, is thought to have long interested rivals.
The Italian cable group Prysmian, which has been eyeing a move into the oil market, denied that it was a bidder. Another Italian group, Saipem, is also among the favourites. The oil and gas contractor declined to comment.
"The possible offers for Wellstream highlight the M&A [merger and acquisition] potential for the oil service sector at this stage in the cyclical recovery," said Keith Morris, an analyst at Evolution Securities. "Large oil service businesses are 'cashed-up' and looking for businesses to add to the geographic or technological footprint." Wellstream stressed that the talks may not lead to an offer, but analysts yesterday were talking up the possibility of a takeover battle for the group.
Industry experts at the Royal Bank of Scotland (RBS) said they expected initial bids to come at about £8 a share, or a 30 per cent premium, but stressed that rival bids could push the price higher. "We have persistently stated this has been the most obvious takeout candidate in the UK oil services sector," the RBS analysts said. "The stock has traded as high as £14-£15, although we would not expect a takeout value close to this. We believe something closer to £8... would be a starting point."