Bringing together two of the UK’s largest energy services companies, Amec Foster Wheeler has agreed to a US$2.69 billion takeover by Wood Group. The combination will create an enterprise with a combined value of about US$6.11 billion.
Earlier today, Wood Group announced a recommended all-share offer for the entire share capital of Amec Foster Wheeler. Through the combined business, which will provide services to the oil and gas, chemicals and mining sectors, Wood Group expects to reduce US$134.50 million in costs.
Amec foster Wheeler revenue in 2016 was US$6,649.65 million (2015: US$6,667.99 million), down by eight percent on a like for like basis, as a strong performance in solar and E&I was offset by the continuing weakness in the oil and gas market. Trading profit in 2016 was US$388.67 million (2015: US$457.11 million).
Significant progress in the Amec Foster Wheeler US$122.21 million overhead cost reduction programme in the fourth quarter was offset by ongoing challenging conditions in the oil and gas market and the impact of cost overruns on a fixed price US government contract in the Pacific in the E&I segment. Overall, trading margin was 5.8 percent, 110 basis points lower than 2015.
“Since the arrival of Jonathan Lewis as CEO, the executive management team has made significant progress towards the transformation of the business. This has been achieved through cost reduction initiatives, the disposal of noncore assets and a reorganisation of the business. The board has fully supported the revised strategy and the preparations to deliver the appropriate balance sheet to support its stand-alone prospects,” said John Connolly, chairman, Amec Foster Wheeler.
“However, the board believes that a combination with Wood adds to the stand-alone 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 Foster Wheeler will also be well represented on the board of the enlarged group, with four of our directors joining Wood’s board, including Roy Franklin, who will be appointed deputy chairman and senior independent director,” added Connolly.
Commenting on the development, Ian Marchant, chairman, Wood Group, 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,” added Marchant.
As a result of the combination announcement, while Amec Foster Wheeler share value moved up 14.7 percent, Wood Group shares gained 4.4 percent value rise. Wood Group has offered 564p per share of Amec Foster Wheeler.
