Energy services firm Wood Group is spinning off most of its GTS gas turbine maintenance arm into a new joint venture with German engineering giant Siemens.
The new business, to be led by GTS chief executive Mark Dobler, will have sales of about $1bn (£623 million) and employ 4,500 people around the world.
Aberdeen-based Wood Group will contribute GTS’ maintenance and “power solutions” divisions to the joint venture in exchange for a 51 per cent stake and up to $70m in cash from Siemens to make up for a difference in valuations.
Siemens will contribute its TurboCare business unit, which provides aftermarket gas turbine, steam turbine and generator design, repair and manufacturing services.
Bob Keiller, chief executive of Wood Group, said the deal was an important step in the firm’s strategy.
He said: “The joint venture with Siemens will bring together two complementary businesses and create a differentiated service offering for a global customer base. Our joint ventures with original equipment manufacturer relationships typically deliver stronger performance, and, as we look ahead, we see good potential for the venture.”
The company’s existing joint ventures which had been part of GTS – Rolls Wood Group, TransCanada Turbines and Sulzer Wood – were excluded from the latest deal.
Wood Group said its gas turbine activities have generally performed better when working jointly with an original equipment manufacturer.
The firm expects the latest coming together to provide it with around $15m a year after an initial bedding in period of two years.
The deal is subject to a range of approvals and completion is expected early next year.
Dobler, who stepped down from the board of Wood Group with immediate effect, said the combined new business would be “a significant integrated rotating equipment service provider to the global power generation, oil and gas and industrial sectors”.
He added: “The joint venture will bring together Wood Group’s capabilities in the areas of asset operations, maintenance, risk management and life-cycle optimisation with the aftermarket design, repair & manufacturing capabilities of TurboCare, to deliver greater flexibility, greater market reach and an expanded footprint to service customers.”
Andrew Dobbing, an analyst at JP Morgan, said the link with Siemens would increase the status, product range and market reach of Wood’s GTS business. He said the cost savings would provide “helpful earnings support” rather than making a material difference to the bottom line.
He added: “This is a welcome resolution to Wood Group’s strategic thinking over the future of GTS. It follows the formation of three previous joint ventures and completes the repositioning of GTS – largely completing the strategic review of this business.
“We note that any further economic impact from the Dorad [Israel] contract – completion is expected by the end of 2013 – will remain in Wood Group.”
Meanwhile broker Liberium Capital said there was “logic” to the new combination, which “will bring together two organisations with complementary strengths, customers and geographic exposure”.