Wood Group to buy Amec Foster for $2.7b

bengaluru — British oilfield services company John Wood Group has agreed to buy Amec Foster Wheeler in a deal valuing its smaller rival at about £2.2 billion ($2.7 billion) and averting a planned £500 million rights issue.

Companies in the industry have had to adjust to lower prices after oil tumbled from a peak of over $100 a barrel in 2014.

The paper deal valued Amec Foster Wheeler shares at 5.64 pence each and they traded close to that level at 10.10 GMT. Wood Group shares also responded positively, gaining five per cent to £7.93.

Amec Foster Wheeler, itself the product of a 2014 merger, said it had been planning to announce a rights issue next week and to announce the suspension of dividend payments to cut costs and boost cashflow. The rights issue has been suspended.

“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.

Amec Foster Wheeler investors will receive 0.75 new Wood Group shares for each share held, the company said. They will own 44 per cent of the merger group but Wood Group executives will take the top jobs.

Wood Group chief executive Robin Watson and chief financial officer David Kemp will keep the same jobs in the new group. Wood Group chairman Marchant will also retain his role.

Wood Group said it expected annual cost savings to reach at least £110 million.