Wood Group acquires Amec in £2.2b all-share deal

[LONDON] John Wood Group Plc agreed to acquire Amec Foster Wheeler Plc in an all-share deal that values the UK engineering-service provider at about £2.23 billion (S$3.84 billion).

Amec shareholders will receive 0.75 new Wood Group shares for each Amec share they hold, Aberdeen, Scotland-based Wood Group said Monday. They'll own about 44 per cent of the combined group.

The takeover comes after several years of pressure on the profits of service providers in the energy industry as the slide in oil prices forced their clients rein in spending and defer large projects. By merging, these engineering companies are aiming to cut costs, extend the scope of their business and become more competitive. Among recent deals, General Electric Co agreed in October to merge its oilfield-services arm with Baker Hughes Inc.

Based on the March 10 closing price, the terms of Wood Group's acquisition represent a value of about 564 pence per Amec share and a premium of almost 29 per cent to the 30-day average price, according to a statement. Amec jumped as much as 23 per cent in London trading, the most in more than 20 years, and was up 18 per cent at 576 pence as of 8:13 am local time.

"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," said Wood Group Chairman Ian Marchant, who will continue as chairman of the combined group.

Robin Watson and David Kemp, chief executive officer and chief financial officer of Wood Group respectively, will remain in these roles in the combined entity. Four members of Amec's board will join the new board.

Wood Group put pretax cost synergies at a "run rate" of at least 110 million pounds a year by the end of the third year after completion. The combination is expected to be accretive on an adjusted earnings-per-share basis for both Wood Group and Amec in the first full year, according to the statement.

The acquisition has been unanimously recommended by the boards of both companies.

BLOOMBERG