The UK-based oil-field services company Wood Group acquired its rival Amec Foster Wheeler for 2.225 billion GBP (about 2.72 billion USD), which will merge the operations of the two of the UK’s largest energy services companies. Wood Group offered 5.64 GBP per share for its rival, exchanging each Amec Foster Wheeler share for 0.75 new Wood Group shares. The deal was accepted by the Board of Directors of Amec Foster Wheeler, as the offer came in the best time for the company, just over a week before to suspend dividend payments and ask shareholders for 500 million GBP for rights issue to ensure it had sufficient cash to avoid a breach of its debt covenants with lenders.
The merger of the both oil-field services companies will result in Amec Foster Wheeler shareholders owning approximately 44% of the share capital of the combined group and sharing in the benefits accruing to the combined group via the realization of significant cost and revenue synergies.
Wood Group hopes to cut 110 million GBP in costs from the combined business, which will provide services to the oil and gas, chemicals and mining sectors.
“The combination will create an asset-light, largely reimbursable business of greater scale and enhanced capability, diversified across the oil & gas, chemicals, renewables, environment & infrastructure and mining segments. By leveraging Amec Foster Wheeler’s and Wood Group’s combined asset life cycle services across project delivery, engineering, modifications, construction, operations, maintenance and consulting activities, the combined group will be able to better capitalize on growth opportunities across a broad cross section of energy and industrial end markets”, said the Chairman of Wood Group, Ian Marchant. “Amec Foster Wheeler’s shareholders will become shareholders in the combined group, thereby gaining from the enhanced operating capabilities, and benefiting from a share of the synergies, a stronger balance sheet and Wood Group’s progressive dividend policy. The Wood Group Board is confident that the combination will build on the individual platforms of Wood Group and Amec Foster Wheeler to the benefit and advantage of customers, employees and other stakeholders. The combination has been unanimously recommended by the boards of Wood Group and Amec Foster Wheeler, and the Wood Group team looks forward to working with the Amec Foster Wheeler team to further develop the combined group over the longer term”, added he.
The latest takeover is one of the largest in the industry in recent times, coming in year of uncertainty, when the sector has been under strong pressure. The companies are suffering of low liquidity and reducing cash flows, after the oil producers slashed their spending and stopped production of low profitable offshore fields.
Wood Group (officially John Wood Group PLC) is a multinational energy services company headquartered in Aberdeen, Scotland. Wood Group is an international energy services company with around 6 billion USD sales and operating in more than 50 countries. The group provides a range of engineering, production support and maintenance management services to the energy and industrial sectors worldwide.
Amec Foster Wheeler PLC is a British multinational consultancy, engineering and project management company headquartered in London, United Kingdom. It is focused on the oil and gas, minerals and metals, clean energy, environment and infrastructure markets and has offices in over 55 countries worldwide. Roughly a third of its turnover comes from Europe, half from North America and 12% from the rest of the world.