Mr Franklin’s comments come in a letter to Wood shareholders in which he sets out the rationale for the board of the Scottish company recommending the 30p per share approach from Sidara.
The price is well adrift of the initial approach made by Sidara, which had been prepared to pay £1.5 billion for Wood last year before pulling out of running, citing geopolitical risks and financial market uncertainty. But that was before Wood was beset by a catalogue of problems, including disclosures over its internal accounting controls that has delayed the publication of its accounts for 2024, and challenges in generating free cash.
Shareholders will be asked to approve the takeover by voting in favour of a scheme of arrangement and special resolutions to be proposed at a general meeting at Sir Ian Wood House in Aberdeen, the company’s headquarters, on November 12.
Wood, which built its reputation as a provider of oilfield engineering services, currently employs 4,500 people in Aberdeen and the North Sea operations it runs from the city.
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Commenting on the future status of headquarters and office locations if the Sidara takeover is approved by shareholders, Mr Franklin writes: “Following the effective date, Sidara intends for Wood to operate and grow the energy and materials pillar of its business from its key locations in the UK and US, together with other key centres of excellence in the Americas, Middle East and Africa, and Asia Pacific.
“Sidara has no plans to make any material restructurings or changes to the locations of Wood’s main operating businesses, including headquarters and headquarters functions.
“Following completion of the acquisition, Sidara will, however, investigate the opportunity to consolidate office locations where Wood and Sidara both currently have a presence. Careful consideration will be given to this exercise, recognising such decisions are important to employees in both companies.
“Any such consolidation will be designed to promote efficiency and customer service, in the interest of delivering the anticipated customer and revenue synergies.”
Mr Franklin reiterates in his letter that Sidara “greatly values the skills and expertise of Wood’s operational leadership and their teams”.
But the oil and gas industry veteran, who has chaired Wood since 2017, warned there could be some job losses should the deal with Sidara be rubber-stamped by shareholders.
He writes: “Based on Sidara’s due diligence, once Wood ceases to be a publicly listed company, there will likely be some limited headcount reductions related to public company-related functions and general, administrative and overhead roles which will no longer be required under private ownership.
“Any such reductions will be carried out in accordance with applicable legal requirements and best practice and subject to necessary information and consultation. Affected employees will be considered for alternative roles within the enlarged group where appropriate. It is expected that the Wood non-executive directors will resign as Wood directors with effect from the effective date.”
Mr Franklin addressed the future leadership of Wood, which is currently helmed by chief executive Ken Gilmartin, stating that final decisions have still to be made.
He said: “Sidara recognises that Wood’s success, just like Sidara’s, is based on its talented and highly competent employees who are fundamental to the future success of the enlarged group.
“In particular, Sidara greatly values the skills and expertise of Wood’s operational leadership and their teams. While no decisions have been made by Sidara regarding the future leadership of Wood at this time, following completion of the transaction, Sidara will work with Wood to assess a suitable executive and governance structure to support the future business.
“No discussions related to incentivisation arrangements for members of Wood’s management have taken place.”
Mr Franklin explains in the wide-ranging letter that the terms tabled by Sidara would stabilise the Scottish business and provide a much-needed injection of capital.
While the Sidara offer is subject to a number of “highly unusual conditions”, including the publication of Wood’s audited accounts on or before October 21, 2025, it has agreed to provide a capital injection of $450m into the Scottish company. Some $250m of this will be available to draw down if Wood shareholders approve the acquisition, while a further $200m will be made available on completion of the deal.
Mr Franklin explains that Wood has “not generated any sustainable free cash flow since 2017, with a total free cash outflow from 2017 to 2024 of approximately $1.5bn, reflecting multiple issues including regulatory fines, significant loss-making contracts, restructuring charges and litigation payments”.
He adds: “More recently, the significant unwind of working capital as the business moved away from large-scale LSTK (lump sum turnkey contracts) and the persistence of multiple exceptional cash items, have prevented Wood from becoming free cash flow positive as previously expected.”
Noting that the current capital structure of the company is “unsustainable”, with gross indebtedness of around $1.6bn, Mr Franklin declares that the Wood directors “believe that any alternative refinancing option would likely generate materially less, and potentially zero, value for Wood shareholders relative to the terms of the acquisition”.
