Wood Sells Nuclear Business to Cut Debt

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--U.K. energy services group Wood Group (LSE:WG) (Aberdeen, Scotland) has announced the sale of its nuclear business for £250 million ($306 million) to Jacobs Engineering Group Incorporated (NYSE:JEC) (Dallas, Texas) as part of its efforts to reduce debt.

Jacobs said that the acquisition, subject to approval, will provide a "strong strategic fit" with its Aerospace, Technology & Nuclear (ATN) business. Wood supplies solutions that span the life cycle of the nuclear industry and provides program management, technical and consulting services in areas such as decommissioning, nuclear new-build and operational support in the civil nuclear and defence segments. That business is mostly concentrated in the U.K.'s nuclear sector and employs more than 2,000 people. It is expected to achieve revenues of approximately $285 million in 2019.

David Kemp, Wood's chief financial officer, said: "The sale of our nuclear business follows other recent divestments and marks a significant step towards achieving Wood's target leverage policy. Although our nuclear business is a strong U.K. player and has performed well, we see better opportunities to develop clear global leadership positions across other parts of our business."

In 2017, Wood Group completed a £2.2 billion ($2.7 billion) takeover of rival engineering firm Amec Foster Wheeler plc (London, England), creating one of the world's largest engineering groups servicing the power, oil and gas, mining and chemicals sectors. For additional information, see October 12, 2017, article - Wood Group Completes Takeover of Amec Foster Wheeler. The deal pushed Wood's net debt up to $2 billion, which has fallen since to $1.5 billion, or 2.2 times earnings before interest, tax, depreciation and amortisation (EBITDA). Wood's plan is to sell off some assets to bring that debt down to its target of 1.5 times EBITDA.

"This acquisition further strengthens Jacobs' position in highly profitable and complementary sectors within nuclear and defense, enhancing our recognized program management skills with deep, technical expertise," said Jacobs Chair and Chief Executive Officer Steve Demetriou. "We are excited to welcome these talented employees to the Jacobs' team. Given the compelling and synergistic fit of our two organizations, we believe this transaction will translate into significant value for Jacobs' shareholders, diverse opportunities for our employees and new, differentiated nuclear and defense solutions for our clients."

Earlier this year, Wood was one of four companies to secure long-term contracts with Sellafield Limited for the long-term decommissioning programme at Europe's largest nuclear power complex in Sellafield on England's west coast. Wood said the contract was worth up to £770 million ($944 million). For additional information, see May 28, 2019, article - Four Decommissioning Contracts Awarded for U.K.'s Sellafield.

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