Wood in $2.7bn AmecFW Takeover
Monday 13 March 2017
UK oilfield services giant Wood Group is taking over Amec Foster Wheeler in a deal valued at around $2.7 billion.
The takeover, coming less than three years after Amec fused with Foster Wheeler, is set to lead to £190 million ($232 million) in one-off costs over the first three years of the combination.
However, the parties are aiming for at least £110 million in pre-tax cost-saving synergies through the deal.
Under the all-shares combination, Amec Foster Wheeler shareholders will get 0.75 Wood shares for each of their own shares, leaving them holding 44% of the combined company.
The offer sent shares in London-listed Wood rising almost 7% and Amec FW almost 18% by 9am on Monday.
The takeover is seeing Wood Group's top executives keep their posts, with Robin Watson remaining chief executive of the combined outfit, David Kemp holding onto the chief financial officer role and Ian Marchant staying on as chairman.
Four Amec FW directors are to join the new board, with Roy Franklin named deputy chairman and senior independent director.
Job losses appear inevitable as Wood said: "The synergy work carried out to date has confirmed the potential to generate cost savings for the combined group through corporate and administration efficiencies, including reducing headcount.
"However, at this stage, there are no fully developed proposals as to how and where such headcount reductions will be implemented.
"Further detailed analysis will need to be undertaken, which will be subject to engagement and (if applicable) consultation with relevant stakeholders (including employee representative bodies)."
Current Wood chairman Marchant said of the deal: "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.
"(It) 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 capitalise on growth opportunities across a broad cross section of energy and industrial end markets."
The boards of both companies have "unanimously recommended" the combination, Monday's statement continued.
UK player Amec first made a takeover move for Foster Wheeler in January 2014, firming up the $3.3 billion deal the next month.
Amec FW's chief executive Jon Lewis has only been in the post since 1 June, having been named in late April to take over from long-time boss Samir Brikho. Before he joined, Lewis was senior vice president for Halliburton's largest division, completion & production.
Amec FW chairman John Connolly said on Monday: "Since the arrival of Jonathan Lewis as chief executive, 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 non-core assets and a reorganisation of the business....
"However, 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."
Amec FW also said on Monday that revenues slipped marginally last year - from £5.46 billion in 2015 to £5.44 billion - due to weakness in the oil and gas sector, partially offset by strength in the environment & infrastructure and solar sectors. Trading profit was down from £374 million to £318 million.