Thursday 10 August 2017

Amec Foster Wheeler has launched a sale process for its UK North Sea operations as part of a disposal effort to allay anti-trust concerns over its proposed merger with Wood Group, which it insists is on track to be completed by year-end.

It comes after the UK’s Competition & Markets Authority (CMA) earlier this month flagged up concerns that Wood Group’s proposed $2.7 billion acquisition of AmecFW - already agreed by both sets of shareholders - would curb competition in the engineering & construction and operations & maintenance markets in the UK sector.

Wood Group has suggested a possible remedy proposal for the CMA that would entail asset sales by AmecFW in the UK market, excluding the latter’s decommissioning business, and was due to submit the final proposal to the authority by 9 August, with a final decision by the CMA scheduled for 11 October.

AmecFW said in its first-half results statement on Thursday the London-listed contractor “has been preparing its UK North Sea operations for sale, with a competitive process already well under way” in an effort to counteract the CMA’s concerns.

At the same time, it stated the all-share offer from Wood Group “remains on schedule to close in the fourth quarter” and is not expected to be affected by a probe launched last month by the UK’s Serious Fraud Office into possible bribery and corruption involving the Foster Wheeler business.

The proposed combination has already received anti-trust approvals from other countries including Australia, Canada, Russia and the US.

AmecFW has raised £229 million in proceeds from disposal of non-core assets since the fourth quarter of 2016, of which £159 million was generated in the first half, and is now looking to sell off its North American nuclear business, as well as the remainder of its steam generator activities.

However, the company has decided to retain its European nuclear operation after consultation with Wood Group, though said it would have reached its £500 million target for non-core disposals had it accepted a preferred offer for this business.

AmecFW reported a first-half pre-tax profit of £77 million, reversing a year-earlier loss of £446 million, despite seeing revenue chopped 24% to £2.3 billion from £2.8 billion in the same period of 2016 amid a “challenging” market.

It was left with an order book of £5.6 billion at the end of the first half, down from £5.8 billion at the end of last year and £6.2 billion a year ago.

AmecFW's shares were at around 447pence, up 2%, in early trading on Thursday.