Global energy services company Amec Foster Wheeler has agreed to a £2.2 billion takeover by Aberdeen-based rivals Wood Group to create the largest UK firm in the sector.Wood Group said in a statement that the deal would result in “significant cost and revenue synergies” of at least £110 million a year. The group has 29,000 employees whilst Amec has about 36,000. Administrative job cuts are now expected across the new combined company, which will have a value of about £5 billion.

Market-leading UK North Sea business

Mark Wilson, an analyst at Jefferies, commented, “While materially above our Amec valuation, we can see Wood Group consolidating its market-leading UK North Sea business, expanding product lines in the US and possibly increasing the scope for asset sales.”Under the terms of the all-share transaction, Amec shareholders would hold 44 per cent of the new entity, with the offer price of 564p representing a 15 per cent premium on Amec's closing share price of 489.2p on Friday. Shareholders will be asked to vote on the deal, with the boards of both companies unanimously recommending it be approved.

Extending the scale and scope

Ian Marchant, Wood Group chairman, said, “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.“Delivering significant sustainable synergies will also result in a leaner and more competitive combined group, creating value for shareholders.”Assuming the deal is approved, Mr Marchant will become chairman of the combined company with Robin Watson and David Kemp, currently Wood Group chief executive and finance boss respectively, taking the same roles in the firm.The takeover was announced on the day Amec announced it had secured a new agreement, worth £125 million, to provide long-term support to EDF Energy Nuclear Generation. Amec expects the contract to generate annual revenues of between £25-£30 million.

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Clive White, president of Amec’s clean energy business, said, “Amec Foster Wheeler’s deep technical knowledge and strong track record in project delivery are crucial to our continued support for EDF Energy’s UK stations, which are producing more electricity than at any time since 2003.“Amec Foster Wheeler’s relentless focus on safety and efficiency is designed to maximise the value of our customers’ assets, and we look forward to working in close partnership with EDF Energy to ensure the safe, efficient, return on investment from its UK nuclear stations.”For related news and features, visit our Enterprise section.Access hundreds of global services and suppliers in our Online Directory  Get access to our free Global Mobility Toolkit

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