Wellstream spurns £755m takeover offer from GE

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The Independent Online

The oil industry services group Wellstream Holdings has rejected a £755m bid from giant US conglomerate General Electric.

GE said yesterday that it was "disappointed" the board of London-listed Wellstream, which focuses on the fast-growing Brazilian offshore market, refused its 750p-a-share proposal.

"GE is disciplined in its acquisitions, and as such, there can be no certainty that it will take any further action," the company said in a statement to the Stock Exchange. The company reserved the right to make an offer on "less favourable" terms following the completion of due diligence.

GE is not expected to go hostile, not least because its offer is well below the prices of 800p-per-share and above estimated for Wellstream by the majority of City analysts.

Wellstream itself declined to comment yesterday, raising expectations that the company is in talks with another possible suitor.

The Newcastle-based group is the world's largest supplier of flexible pipes used in offshore drilling and is also closely involved in the technical advances needed to develop the so-called "sub-salt" deposits in the deep water off Brazil.

The company has been the subject of widespread takeover rumours for some months and in mid-September Wellstream's management confirmed the company had received a number of preliminary approaches. The group declined to give any names, but several are still tipped as possible acquirers of Wellstream, including National Oilwell Varco and Saipem.

Peter Hitchens, an oil and gas analyst at Panmure Gordon, said: "Wellstream is an attractive opportunity for any predator."

The group's stock has risen more than 40 per cent to over 770p since the start of September, fuelled by speculation about the company's future. But it dropped by 2.44 per cent to close at 761p yesterday, despite suggestions that the statement from GE might prove a boost to any other talks.

Keith Morris, an analyst at Evolution Securities, said: "Another suitor may break cover now that GE has laid its cards on the table and indicated that 750p is the upper end of its price range."

Wellstream's most recent financial results, in August, showed an order backlog up by 14 per cent to £246m in the first half of the year, and gross margin improved by nearly one percentage point to 24.6 per cent. But the group issued a profits warning in July and first-half pre-tax profits dropped from £26m to £11m. The company blamed a "subdued" market outside Brazil.

Wellstream is particularly active in Brazil, which contributed around half the company's revenues. Recent major contract wins with state-owned Petrobras in the Marlim Sul field and another substantial supply contract with OGX helping boost the forward order book.