Apollo Global ditches months-long plans to delist Wood Group

US private equity firm Apollo Global said it would not follow through with its offer to buy UK oil engineering company Wood Group after a months-long pursuit.

The New York-based fund manager did not explain on Monday why it decided to ditch its bid to acquire Wood at 240p per share, valuing the company at about £2.2bn including debt. A person close to the buyout group, however, said that it concluded after further examination that at the current offer price a deal wasn’t worth pursuing. Under UK takeover rules, Apollo is not allowed to bid for the company for six months.

Wood Group’s shares fell more than 34 per cent to 143.6p in early London trading on Monday.

Wood’s board “remains confident in Wood’s strategic direction and long-term prospects”, it said in a statement on Monday.

The breakdown in talks caps a four-month attempt to acquire the Scottish group, whose shares had traded down in the year before Apollo’s bid was first revealed in February.

Wood decided to engage with Apollo on April 17 after five preliminary bid offers from the investor. The deal was subject to due diligence and Apollo had until Wednesday to confirm whether it intended to make a firm offer.

Apollo’s decision highlights the difficulties private equity firms face when seeking to delist public companies even as many London-listed groups suffer from a trading discount compared with peers in the US, making them vulnerable to potential takeovers. On Friday, Apollo said it did not intend to make an offer for THG after engaging in talks with the London-listed ecommerce company in the previous weeks.

Aberdeen-based Wood, which provides engineering services for the energy and materials sector, had come under pressure from an activist shareholder to boost its share price. Fund manager Sparta Capital had called on the company to buy back its stock to boost its valuation. In a December letter to Wood, the investor said it was “concerned that the current significant undervaluation makes the company vulnerable to takeover”.

A slowdown in merger and acquisition activity over the past 12 months has put buyout firms under pressure to invest the money they have raised. Private equity groups were sitting on a record $3.7bn in unspent cash at the end of last year, according to data compiled by Bain & Co. 

Taking companies private has been identified as an important source of deal flow for companies looking to invest this money, with a flurry of takeover activity last month particularly in the UK.

This story has been modified to clarify that Wood Group did not reject the 240p per share bid