Private equity trio complete €729m ABB deal

A private equity consortium comprising Candover, 3i and JPMorgan Partners has completed the purchase of part of ABB’s oil and gas business for at least €729m.

ABB, the Swiss-Swedish engineering group, has sold part of its oil and gas business to Candover, 3i and JPMorgan Partners for €729 million ($925 million), including a potential additional sum of €39 million ($50 million) in deferred consideration.

The businesses involved are ABB Vetco Gray, which includes ABB’s oil and gas activities in Brazil, and ABB Offshore Systems, which includes the international oil and gas modification and maintenance operations. The new group, which will be known as Vetco International, is awaiting the completion of compliance issues, which are currently under review.

Candover, 3i and JPMorgan Partners, together with co-investors NIB Capital and Vetco International senior management, are committing €331 million to the deal, with debt and mezzanine finance of approximately €519 million ($653 million) being provided by a syndicate of banks led by JPMorgan, Bank of Scotland and CSFB.

The deal sees two new appointments to the company’s management team. John Kennedy, the current chairman of Wellstream International and former executive vice president of Halliburton, becomes executive vice president. Paul Loyd, the former chairman and CEO of Falcon Corporation, the world’s largest offshore drilling company, becomes deputy chairman.

Vetco manufactures drilling and production equipment for drilling rigs and production platforms; designs and manages the installation of subsea production systems; modifies and maintains work on existing offshore installations; and constructs new-build fixed and floating production facilities. In 2002, the group reported turnover of €1.36 billion ($1.72 billion) with 7,500 employees in 31 countries.

“Candover first approached ABB almost two years ago with a view to acquiring the oil and gas business as part of our strategic intent to build a significant presence in the upstream oilfield services sector,” said John Arney, a director at Candover. “We are acquiring a market-leading business with global scale, at a time when strong growth is predicted for the industry.”

All three lead private equity firms are experienced oil and gas sector investors. 3i has 40 companies in its oil and gas portfolio and floated John Wood Group, the UK’s largest oil service company, in 2002. Candover backed oil and gas field services firm Expro International in 1992 and floated it on the London Stock Exchange in 1995. JPMorgan Partners has backed 45 energy sector companies including R&B Falcon, Encore Energy and Bill Barrett Corporation.