Candover, Goldman to buy Expro for $3.16 billion

Funds managed by private equity firm Candover (CDI.L: Quote, Profile, Research) and investment bank Goldman Sachs (GS.N: Quote, Profile, Research) have agreed to buy British oil services company Expro International (EXR.L: Quote, Profile, Research) for 1.605 billion pounds ($3.16 billion).

Expro management said in a statement on Thursday it would recommend the 1,435 pence per share bid from the funds' bidding vehicle Umbrellastream, which also includes Dutch private equity house Alpinvest, to shareholders.

Expro shares, which registered a near 40 percent boost in February when the company announced a bid approach, traded up 10.59 percent at 1,462 pence at 5:25 a.m. EDT, suggesting some investors thought a higher bid may be made.

Analysts said this was unlikely, given the high price being offered -- the bid equates to around 30 times earnings for the year to the end of March -- and the fact other parties were invited to bid.

"In the event of a third party entering the arena, we would not expect a significantly higher offer," said Keith Morris, oil analyst at Evolution Securities.

Peter Hitchens, oil analyst at Seymour Pierce, said the bid, which follows the takeovers of UK oil services firms Abbot Group and Sondex in the past half-year, would lead to higher valuations in the sector and speculation about further deals.

"Amongst our universe of stocks we believe the most vulnerable are Hunting and Lamprell," he said in a research note.

Hunting (HTG.L: Quote, Profile, Research) shares traded up 1.88 percent at 839-1/2 pence, Lamprell (LAM.L: Quote, Profile, Research) was up 2.45 percent at 452-3/4 pence, while Wood Group (WG.L: Quote, Profile, Research), was up 4.62 percent at 458-1/4 pence.
A spokeswoman for Candover denied it was overpaying for Expro, saying the bid was just below the 34 times earnings multiple U.S. private equity firm First Reserve agreed to pay for Abbot in December.

Nonetheless, the bidders had to stump up over 40 percent of the purchase price in cash, with banks offering less than 1 billion pounds in debt.

The spokeswoman blamed the deterioration in credit markets for the low debt level relative to traditional private equity buyouts.

KKR and TPG Capital borrowed $35.75 billion to buy U.S. power generator TXU last year for $32 billion plus debt.

Oil and gas industry services providers such as Expro have benefited as record oil prices prompt energy companies to boost spending on exploration and development of reserves.

Candover has previously invested in the oil services sector, with investments in pipemaker Wellstream (WSML.L: Quote, Profile, Research) and in Expro itself when it backed a management buy-out in 1992.

Chris Fay, Chairman of Expro, said the bid was a good deal for investors.

"Umbrellastream's cash offer provides Expro shareholders with certain value today and fairly reflects both the value that has been created during this period and the future potential of the group," he said.

"Certainly looking at the forward P/E and EV/EBITDA this looks the case," he said.