Wood Group’s shares have dived after rejecting Apollo buyout deal

on Apr 17, 2024
  • Wood Group’s stock is not doing well after it rejected Apollo’s buyout deal.
  • It has lost over a third of its value since then.
  • The performance mirrors that of companies like Entain and Nordstrom.

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Wood Group (LON: WGL) share price has bounced back slightly in the past few days as the mood in UK equities has improved. The stock has rebounded from the year-to-date low of 127.4p on April 3rd to the current 143.7. It remains much lower than its highest point in 2023.

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Was it wrong to reject Apollo’s offer?

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Wood Group, the giant British engineering firm, is not doing well a year after it rejected a buyout bid by Apollo Global Management, a leading private equity company.

Apollo made four offers for the company, with the last one valuing it at 237p a share at a valuation of over £1.8 billion. Wood Group has shed over 30% of its value since then and attempts to bounce back faded at 178.7p in January.

Wood Group’s situation mirrors that of other companies in the past. For example, Entain, the parent company of Ladbrokes, Coral, and BetMGM rejected a £11 billion bid from MGM Resorts in 2021, saying that the offer undervalued it. 

Today, Entain is a shadow of its former self. Its stock has crashed by almost 50% from its highest point in 2023, giving it a market cap of about £5 billion.

The situation also mirrors that of Nordstrom, the popular American retailer. In 2018, the company rejected a $8.4 billion deal by members of the founding family. Today, the company has a market cap of more than $2.9 billion. 

Most recently, THG Group, the parent company of LookFantastic and MyProtein, rejected a £2 billion buyout bid from Apollo. Now, the stock has crashed and the company’s valuation has dropped to about £794 million. 

Now, Sparta Capital, an activist company that has been a thorn in the flesh for Wood Group is calling for more changes. The fund believes that the management should opt to list the company in the US, where it will attract more value. It also recommends that the company should buy back its stock in a bid to boost its share price.

The most recent results revealed that Wood Group’s revenue rose by 8% to $5.9 billion. Its operating profit jumped to $38 million while its adjusted EBITDA moved to $423 million. Most of its revenues came from Europe followed by the Americas and Middle East & Africa.

What next for the Wood Group?

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Wood Group share price

WGL chart by TradingView

Turning to the daily chart, we see that the WGL share price made a big down-gap in 2023 after the company rejected a deal from Apollo. That crash saw it crash from 218p to a low of 145.9p. All attempts to fill the gap have failed, with the most recent one stalling at 178.7p in January. 

The stock has plunged below the 50-day and 200-day Exponential Moving Averages (EMA), signaling that bears are still in control.

Therefore, the outlook for the stock is still bearish, with the crucial level of support to watch being at 127.7p, its lowest swing this month.

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