Wood Group buys oil services rival for total $955 million

By Tom Bergin

LONDON (BestGrowthStock) – UK oil services provider Wood Group (WG.L: ) said it agreed to buy unlisted Aberdeen, Scotland-based rival PSN for $955 million, including $325 million of debt, the latest in a long line of acquisitions by Wood Group.

The deal follows an industry trend of increased consolidation, creating larger players which can offer clients a broader range of services. It came as General Electric Co (GE.N: ) said it would buy British oilfield services company Wellstream Holdings Plc (WSML.L: ) for about 800 million pounds ($1.3 billion).

Shares in Wood Group, which provides oilfield services to companies such as BP (BP.L: ) and Royal Dutch Shell (RDSa.L: ), traded up 7.7 percent at 526 pence at 0849 GMT, outperforming a 0.3 percent rise in the STOXX Europe 600 Oil and Gas index (.SXEP: ). The deal will be funded by debt, cash on hand and the issue of some Wood Group shares to PSN management, in respect of part of their stakeholdings.

Chief Executive Allister Langlands told Reuters he expected Wood Group’s gearing level, which will rise to between 40 and 50 percent after the deal, to fall back rapidly in the coming two years due to strong cashflows from PSN.

Wood Group said the deal would be earnings and cash flow accretive from the outset and it was expected to complete in the second quarter of 2011.

PSN was part of Halliburton’s (HAL.N: ) KBR engineering division until 2006, when management led by current CEO Bob Keiller completed a $280 million buy-out.

(Reporting by Tom Bergin; Editing by David Holmes)

Wood Group buys oil services rival for total $955 million