Engineer Wood Group faces Sparta call to explore sale

Business

The FTSE-250 engineering services company John Wood Group is facing fresh calls to launch a strategic review almost a year after the collapse of a £1.7bn takeover bid.

Sky News has learnt that Sparta Capital Management has written to Wood chairman Roy Franklin to urge him to explore a US listing or a sale of the company after seeing its shares slump by more than a third during the last 12 months.

In its letter to Mr Franklin, Sparta, a London-based investment manager, praised the company for its “many operational achievements” since the implementation of a new corporate strategy nearly 18 months ago.

Wood’s shares are, however, languishing at around 140p, more than 40% below the level of a 240p-a-share cash bid tabled by Apollo Global Management in early April 2023.

The London-listed company did not reject that offer, which was the fifth proposal submitted by Apollo, but saw the American private equity behemoth abandon its interest just over a month later.

“If the UK public markets are unwilling or unable to engage in Wood’s story, we believe you should undertake a strategic review and actively seek alternative solutions,” Sparta’s letter, which has been seen by Sky News, said.

The investor added that it noted “recent successful attempts by corporates to move their primary listing away from markets which they have determined do not recognise the true worth of their businesses”.

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Sparta, which is understood to be a top-ten shareholder in Wood, cited the US, where shares in its rivals Jacobs and KBR are publicly traded, as “a logical potential listing venue”.

“If you conclude that shareholder value will be maximised through a sale of the company, we encourage you to engage with any suitable bidders who may emerge during this process,” the letter added.

Sparta’s expression of frustration at Wood’s share price reflects a growing disquiet among investors in many London-listed companies about the valuations attached to them.

Boards of companies as large as Shell, the oil behemoth, have begun to acknowledge publicly their frustration at what they perceive to be a gulf between their intrinsic valuation and that which the public markets are attaching to them.

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Flutter Entertainment, the gambling group behind Paddy Power, recently confirmed that it would move its primary listing to the US.

Last week, the boss of E-Therapeutics, a fast-growing but loss-making biotech company, described the London stock market as “broken and closed” as he announced plans to delist it and pursue a New York flotation at a future date.

The comparatively weak valuations of many London-listed companies is fuelling a wave of takeover bids, frequently by overseas rivals, and encouraging activist investors to take stakes in the hope of engineering some form of corporate activity.

Sparta, which was launched in 2021 by Franck Tuil, a longstanding executive at the prominent investor Elliott Management, has also built stakes in other London-listed companies whose shares have fallen sharply, including the footwear maker Dr Martens.

Recently, another Dr Martens investor, Marathon Partners, called on its board to initiate a strategic review with the objective of maximising value from a possible sale.

Sparta declined to comment about its letter to Mr Franklin.

Wood Group has been contacted for comment.

On Monday, shares in the oil and gas engineering company closed at 140.4p, giving it a market capitalisation of just over £975m.

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