Sandvik has signed an agreement to divest the majority of Drilling and Completions (Varel), meaning the operations relating 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.

IM understands that the Varel brand will be a part of the divested company, however, there will be a transition period where Sandvik can still use the brand following the closing of the deal.

“In line with our strategy, we continue to focus Sandvik’s 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 Sandvik’s earnings per share from the envisaged minority ownership, reported in associated companies, would have been limited based on the 12 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 900 million SEK ($90 million), on a cash and debt free basis, implying an enterprise value of 1,250 million SEK ($130 million) for the total business. Upon closing, the divestment will generate a positive cash flow impact of an estimated 700 million SEK ($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 closing of the transaction, which is expected during the first quarter of 2020, and is subject to the approval of relevant authorities.