Engineer Wood Group faces call from Sparta to explore sale | Business News

FTSE-250 engineering services firm John Wood Group faces fresh calls to launch a strategic review almost a year after the collapse of a £1.7 billion takeover bid.

Sky News has learned 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 fall by more than a third during the past 12 months.

In its letter to Franklin, Sparta, a London-based investment manager, praised the company for its “many operational achievements” since implementing 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 per share cash offer presented by Apollo Global Management in early April 2023.

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

“If the UK public markets are unwilling or unable to engage with the Wood story, we believe they should undertake a strategic review and actively look for alternative solutions,” said Sparta’s letter, which was seen by Sky News.

The investor added that he has observed “recent successful attempts by companies to move their primary listing away from markets that they have determined do not recognize the true value of their businesses.”

Sparta, which is considered one of Wood’s top ten shareholders, cited the US, where shares of its rivals Jacobs and KBR are publicly traded, as “a logical potential listing location”.

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

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

The boards of directors of companies as large as Shell, the oil giant, have begun to publicly acknowledge their frustration at what they see as a gulf between their intrinsic value and that which public markets are assigning to them.

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Flutter Entertainment, the gambling group behind Paddy Power, recently confirmed it would be moving its main listing to the US.

Last week, the head of E-Therapeutics, a fast-growing but loss-making biotechnology company, described the London stock market as “broken and closed” as he announced plans to delist it and proceed with an IPO. capital in New York at a future date.

The comparatively weak valuations of many London-listed companies are fueling a wave of takeover bids, often by foreign rivals, and encouraging activist investors to take stakes in the hope of devising some form of entrepreneurial activity.

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

Recently, another Dr Martens investor, Marathon Partners, called on its board to begin a strategic review with the aim of maximizing the value of a potential sale.

Sparta declined to comment on its letter to Mr. Franklin.

Madeira Group was contacted for comment.

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