Candover consortium agrees ABB unit deal

Candover, 3i and JP Morgan Partners have agreed to pay between $925m and $975m for the Swiss engineering group’s upstream oil, gas and petrochemicals division.

Candover, 3i and JP Morgan Partners have announced a preliminary agreement with struggling Swiss-Swedish engineering group ABB over the sale of its oil, gas and petrochemicals division.

The deal on the table values the business at between $925m and $975m (E828m) considerably lower than the E1.2bn sought by ABB in negotiations which date back to the beginning of 2003. A spokesperson for the bidding consortium said that details of the preliminary agreement had been published to coincide with ABB’s annual results published this morning, and that there remains “a fair degree” of negotiations on price, albeit within the $925m and $975m price range. The mainly downstream business ABB Lummus Global is not included in the acquisition.


ABB’s oil, gas and petrochemicals (OGP) unit comprises two major subsidiaries: Vetco Gray, which manufactures drilling and production equipment installed on drilling rigs and production platforms, and Offshore Systems, which designs and manages the installation of subsea production systems, modification and maintenance of existing offshore installations and constructs new build fixed and floating production facilities. ABB's upstream business has 7,500 employees across 31 countries and had revenues of $1.7bn in 2002.


Candover has reportedly secured financial backing from Bank of Scotland, Canadian bank CIBC and Credit Suisse First Boston, which will provide the debt element of the deal’s financing.


The completion of the deal is subject to a legal compliance review, which will look at improper payments made by the unit to three countries in Africa, Central Asia and South America.


If completed, the deal would be Candover’s second foray into the oil and gas sector this year, following its acquisition of Halliburton unit Wellstream, a manufacturer of flexible pipe applications for the offshore deepwater oil and gas business. The transaction was valued at E123m, with debt and mezzanine financing again provided by Bank of Scotland.