Wood Group moves much closer to divestment target with $135mln deal

Wood Group (LSE:WG.) has agreed to sell its 50% interest in RWG (Repair & Overhauls) Limited to Siemens Energy Global for $135 million in cash, significantly advancing its targeted $200 million disposal program. This divestment, which realizes a substantial premium over RWG's $69.2 million balance sheet valuation and contributed $32.9 million in adjusted EBITDA in 2023, is a key strategic move to simplify Wood's business, reduce net debt, and mitigate negative free cash flow. Completion is expected in late 2025 or early 2026, subject to regulatory clearances.

Analysis

John Wood Group PLC is making significant progress on its strategic disposal program with the agreed sale of its 50% interest in RWG to Siemens Energy Global for $135 million in cash. This single transaction accounts for 67.5% of its announced $200 million target for the year, signaling strong execution on its deleveraging and simplification strategy. The sale price represents a notable premium, realizing nearly double the $69.2 million at which the asset was valued on the balance sheet at year-end 2023. While the divestment will remove RWG's $16.3 million annual post-tax profit contribution (based on FY2023 figures) from Wood's earnings, the proceeds are explicitly targeted at reducing net debt and mitigating the impact of negative free cash flow, addressing key investor concerns. The deal's completion, contingent on regulatory clearances and expected in late 2025 or early 2026, introduces a timing consideration but reinforces the company's commitment to strengthening its financial position.

Key Decisions for Investors

• Investors should view this transaction as a positive catalyst for Wood Group's balance sheet, as the significant premium over book value and use of proceeds for debt reduction directly address financial stability concerns.
• It is crucial to adjust forward-looking earnings models to account for the removal of RWG's $16.3 million in annual post-tax profit following the deal's completion.
• Monitor for announcements regarding the remaining ~$65 million in targeted asset sales and track the progress of regulatory approvals for the RWG transaction, as its closure is still over a year away.