Swedish engineering firm Sandvik has entered a deal to divest 70% of Drilling and Completions (Varel) operations to the private equity firm Blue Water Energy and its co-investor Nixon Energy Investments.

Sandvik will remain a minority owner by retaining 30% of the company and hold a position as one of the board members.

The deal is valued at Skr900m (approximately $90m) on a cash and debt-free basis. It implies an enterprise value of Skr1250m ($130m).

Sandvik Drilling and Completions is a global supplier of drilling solutions focusing on drill bits and downhole products for well construction and well completion.

Sandvik president and CEO Björn Rosengren said: “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.”

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Upon completion, the divestment is expected to generate cash flow estimated at Skr700m ($70m).

Sandvik Drilling and Completions will remain consolidated in the financial statements of Sandvik Mining and Rock Technology until the completion of the transaction, Sandvik noted.

The transaction is subject to the approval from relevant authorities and scheduled for completion in the first quarter of next year.

Sandvik would book an Skr3900m ($400m) goodwill writedown related to the divestment in the fourth quarter of this year.

Last July, Sandvik acquired Inrock, a supplier of rock drilling tools and services for horizontal directional drilling (HDD) to the North American market.