Sandvik has signed an agreement to divest the majority of Drilling and Completions (Varel), the operations related to the oil and gas industry, to the private equity firm Blue Water Energy and its co-investor, the privately owned Nixon Energy Investments. Sandvik will remain a minority owner of 30% of the company and hold a position on the board.
In line with our strategy, we continue to focus Sandviks business portfolio to core areas. 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, says Björn Rosengren, President and CEO of Sandvik.
In the oil and gas industry, Sandvik Drilling and Completions is a global supplier of drilling solutions focusing on drill bits and downhole products for well construction and well completion.
The contribution to Sandviks earnings per share from the envisaged minority ownership, reported in associated companies, would have been limited based on the 12 month period which ended in 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 (USD $90 million), on a cash- and debt-free basis, implying an enterprise value of SEK 1,250 million (USD $130 million) for the total business.
Upon closing, the divestment will generate a positive cash flow impact of an estimated SEK 700 million (USD $70 million), net of expected transaction costs. Sandvik Drilling and Completions will remain consolidated in the financial statements of Sandvik Mining and Rock Technology until the closing of the transaction, which is expected during the first quarter of 2020, and is subject to the approval of relevant authorities. The transaction triggers a write-down of goodwill and other intangible assets in the estimated amount of SEK 3,900 million (USD $400 million), to be reported in Sandviks financial statements in the fourth quarter.
Sandvik Mining and Rock Technologys actuals and pro forma numbers based on the last 12-month period, which ended in September 2019.
| SMRT after deal | SMRT before deal | |
| Order intake, SEK | 44,682 | 46,677 |
| Revenues, SEK | 43,834 | 45,829 |
| Adjusted operating profit, SEK | 8,540 | 8,478 |
| Adjusted operating margin, % | 19.5 | 18.5 |
Press release courtesy of Sandvik Group