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  • You are here:M&A

Amec Foster Wheeler in £5bn merger

Oil and gas giants Wood Group and Amec Foster Wheeler have agreed to a £5bn all-share merger.

The boards of the two firms have agreed terms for Wood Group to acquire the FTSE 250-listed company with Amec shareholders forming approximately 44 per cent of the share capital of the combined group. 

Under the terms of the deal, each Amec Foster Wheeler shareholder would receive 0.75 Wood Group shares per existing Amec share.   

Wood Group’s directors will stay at the helm of the new firm, with Robin Watson staying as chief executive and David Kemp remaining as chief financial officer. Ian Marchant will continue as chairman.

A statement by Wood Group said the new firm had opportunities for cost and revenue synergies in the region of £110m a year, which would provide a “significant shareholder value creation opportunity”.

Mr Marchant said: “The combination represents a transformational transaction for Wood Group, which accelerates our strategy and creates a global leader in project, engineering and technical services delivery across a range of industrial sectors.

“The combination extends the scale and scope of our services, deepens our existing customer relationships, facilitates further development of our technology-enabled solutions and broadens our end market, geographic and customer exposure.

“The combination will create an asset-light, largely reimbursable business of greater scale and enhanced capability, diversified across the oil and gas, chemicals, renewables, environment and infrastructure and mining segments.”

Amec Foster Wheeler also published its results for the 12 months to 31 December 2016, which showed revenue down 8 per cent to £5.4bn and profit falling from £374m to £318m.

Amec Foster Wheeler’s order book had shrunk from £6.2bn in the half-year results to £5.8bn by the end of December.

The results showed that Amec’s revenue from oil, gas and chemicals had taken a significant hit since 2014, falling by a third from £3.25bn to £2.26bn over two years, with the firm expecting the decline to continue in 2017.

The falls in Amec’s revenue from oil operations had been partially offset by gains in power and process, which rose 49 per cent to £1.45bn in 2016, and environment and infrastructure, which rose from £839m to £954m.

Amec operates in more than 50 countries, offering consultancy, engineering, project management, operations and construction services, project delivery and specialised power equipment services.

Wood Group started as a ship repair business in Scotland in 1912 but now operates in more than 40 countries, had a 2016 turnover of $4.93bn (£4.04bn in today’s prices) and works on oil platforms, factories, power stations, wind farms and refineries.

Amec Foster Wheeler chairman John Connolly said: “The board believes that a combination with Wood adds to the standalone prospects of the company, by accelerating the delivery of the future value inherent in the Amec Foster Wheeler business and, at the same time, helps to realise the full potential of each of Amec Foster Wheeler and Wood.

“The all-share structure of the offer allows our shareholders to benefit from the significant synergies and other strategic benefits that are expected to be realised from the combination.”

Amec’s share price rose 18 per cent in early trading this morning to 576p, with Wood Group rising 8 per cent to 810p.

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