Amec Foster Wheeler accepts £2.2bn offer from Wood Group

Consulting engineer Amec Foster Wheeler has today accepted a £2.2bn ($2.7bn) all-share offer from oilfield service company Wood Group, in a deal that unites two of the UK’s largest energy services outfits.

Ian Marchant, the chairman of Wood Group said in a press statement: "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 deal) provides a lifeline for a struggling Amec and rekindles bullishness in Wood Group– Mike van Dulken, Accendo Markets

The united company will operate across the oil and gas, chemicals, renewables, nuclear, infrastructure and mining industries.
The deal, which was unanimously accepted by both boards, values Amec at £5.64 per share, which is a 15.3% premium to its Friday close of 489.2p. Amec shareholders will receive 0.75 of new Wood Group share for each share held. If those remain the terms of the agreement, Amec shareholders will end up with about 44% of the share capital of the combined group.

Mike van Dulken, head of research at Accendo Markets, commented in a note: "The deal appears beneficial for both sets of shareholders, hence a positive reaction by both share prices. It also provides a lifeline for a struggling Amec and rekindles bullishness in Wood Group."

He added that Amec shareholders would be cheered by their premium, which lifts the company’s price to a level last seen in October. "This was when panic set in about a now avoidable £500m rights issue to bolster a debt-laden balance sheet and dividend suspension," van Dulken said.

Wood Group, which is based in Aberdeen, has an annual turnover of about $5bn.

Robin Watson and David Kemp, currently the chief executive and chief finance officer, of Wood Group, will continue in their roles. Marchant will continue as chairman. Four members of the Amec Foster Wheeler Board will join the board as non-executive directors, with Roy Franklin joining as deputy chairman.

Amec announced this morning that it had secured a third agreement with EDF Energy to provide operational support to the UK’s reactor fleet.

Under the £125m ($153m) Technical Support Alliance 3 agreement, the engineering consultancy will continue its operational support for the UK reactor fleet, which began more than 50 years ago. The five-year agreement, with an option to extend for a further five years, follows Amec’s partnership with EDF Energy under two similar frameworks.

Amec expects the contract to generate annual revenues of between £25m and £30m.

Stuart Crooks, EDF’s managing director for generation, said: "Amec Foster Wheeler has worked in partnership with EDF Energy for a number of years and shares our vision for zero harm, exceptional nuclear safety performance, and world record-breaking results. The support of all our strategic partners is an important factor as we continue to operate our nuclear stations to the highest standards, providing secure, low-carbon, affordable power for the UK."

Image: One of Amec’s future schemes is the Moorside nuclear power station in Cumbria (NuGen)

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