Sandvik to divest majority of Sandvik Drilling and Completions
November 7, 2019
Sandvik AB, Stockholm, Sweden, has signed an agreement to divest the majority of Sandvik Drilling and Completions, which the company formed following its acquisition of Varel International Energy Services, Inc. in 2014, to private equity firm, Blue Water Energy and its co-investor, the privately owned Nixon Energy Investments. Sandvik will reportedly remain a minority owner of 30% of the company and hold a position on the board.
According to the company, the contribution to Sandvik’s earnings per share from the envisaged minority ownership, reported in associated companies, would have been limited based on the twelve month period ending September 2019. The purchase price for the 70% share of Sandvik Drilling and Completions related to the oil and gas industry now divested by Sandvik, is SEK 900 million on a cash and debt free basis, implying an enterprise value of SEK 1,250 million for the total business.
Upon closing, the divestment is expected to generate a positive cash flow impact of an estimated SEK 700 million, net of expected transaction costs. Sandvik Drilling and Completions will remain consolidated in the financial statements of Sandvik Mining and Rock Technology until closing of the transaction, which is expected during the first quarter of 2020, and is subject to the approval of relevant authorities.
“In line with our strategy, we continue to focus Sandvik’s business portfolio to core areas,” stated Björn Rosengren, President and CEO of Sandvik. “While Sandvik keeps the mining related part of Drilling and Completions, the oil and gas related operations will now receive full attention from its new owners to support profitable growth.”