Wood Group has agreed a £2.2 billion all-share offer for rival Amec Foster Wheeler, the companies have announced.
The deal is a response to the difficult tracing conditions in the oil services sector caused by weak crude prices. Both companies have recently reported a slide in revenues and profits and had been making moves to reduce staffing levels amid pressure to cut costs.
The new combined group will have expertise in oil, gas, power, chemicals and mining and would create “a global leader in project, engineering and technical services delivery”, according to Wood Group Chairman, Ian Marchant.
The combined group would have revenues of over $12 billion. Wood Group has identified “sustainable cost synergies of at least £110 million” per year, as well as significant additional revenue growth opportunities, it said in a statement.
“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,” said Marchant. “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.
“Delivering significant sustainable synergies will also result in a leaner and more competitive Combined Group, creating value for shareholders.”
Amec Foster Wheeler has now cancelled a planned £500 million rights issue designed to help it cut debt. It also announced an eight per cent drop in 2016 revenues to £5.4 billion and a £56 million slide in profits to £318 million.
Amec Foster Wheeler shareholders will own 44 per cent of the combined group under the terms of the deal.