Barrenjoey in new Worley link

Worley CEO Chris Ashton.

Investment bank Barrenjoey turning up to help Worley in its $500m share buyback attracted attention on Wednesday.

Traditionally, Worley works with UBS, but with the buyback being conducted by both UBS and Barrenjoey, some believe something else could be afoot.

As an Australian bank establishing itself about four years after its launch, the Matthew Grounds-led investment bank Barrenjoey is known to follow the money, and has a reputation for hitching itself to wagons where lucrative deal fee streams are possible in the future.

There’s been chatter that in the past six months the Chris Ashton-led Worley has been weighing up the merits of moving on its troublesome rival Wood Group.

But, Worley would not comment on its intentions for its UK-based competitor when asked by this column.

Wood this week told the market it had received an approach from Sidara, the group which previously tried to buy Worley and also made a buyout attempt for Wood Group last year for £1.5bn.

Worley now has the firepower for mergers and acquisitions, with its share price soaring more than 10 per cent after announcing its result on Wednesday.

The engineering firm has flagged the pursuit of growth in a structured way in target markets with significant growth opportunities at higher margins and capital management to fuel growth by generating free cash for investments, dividends, acquisitions and debt reduction.

Meanwhile, as earlier reported by DataRoom, the $7.5bn Worley is kicking goals as Wood had earlier announced asset sales worth between $US150m ($235.6m) and $US200m ($316.1m).

Reports have surfaced out of the United Kingdom that it has also had various approaches for its consultancy business (likely accounting for much of its value), and sources believe this would be of interest to Worley.

It could well have made an approach, although Worley may see its competitor happy to go to a stronger player so that it rules a wounded player out of the market that bids low prices in a desperate attempt to win back work.

Wood Group is wrestling with about $US680m of net debt after it hit $US1.1bn last year and its market value is about £200m ($400m).

Most of its loans are due in 2026 and it is weighing refinancing options.

Wood said the independent review was continuing, so more asset sales could be announced.

Worley is in strong shape, capitalising on the back of challenges related to its competitors, including Wood, which borrowed too much debt when it embarked on an acquisition of Amec Foster Wheeler for $US2.7bn in 2017.

As a result, it has cut costs and lost key staff, and therefore customers, weighing on its overall performance.

Since then, Wood has fended off takeover advances from Apollo as well as Sidara.

Around the time Sidara bid for Wood last year, with its $US1.9bn proposal eventually rejected, Sidara offloaded a 19 per cent stake in Worley, the company it had been keen on acquiring in 2016, for $1.4bn.

Its holding reached 26 per cent, but it was diluted after the company purchased the energy, chemicals and resources division of Jacobs Engineering in a $4.6bn deal in 2019.

For the six months to December 31, Worley reported a 73 per cent increase in profit after tax to $183m as revenue fell 4 per cent to $5.6bn.