Wood Group expecting to save £150m through Amec merger

Forecast: Energy services giant ups its annual savings forecast by £40m

Wood Group has significantly increased the level of “cost synergies” it expects to make following its proposed £2.2 billion takeover of Amec Foster Wheeler.

The energy services group now expects to make savings of £150 million per year by the end of the third year post-completion, a £40m rise on its previous estimate.

The north east-based group said the upping of the estimate came after Amex provided certain operating financial information that allowed for detailed analysis to be carried out.

The company also indicated the rise of more than a third in its savings projections was unlikely to be the last. The savings will come in three areas. Half of the total is expected from operating efficiencies which will include procurement savings and a reduction of duplicate costs across country and regional leadership.

A further 20% will come from corporate spend, including a reduction of duplicate costs across board and executive leadership teams. The final 30% will come from administrative costs, including the consolidation of overlapping office locations, the elimination of duplicated IT systems and in other central support functions.

Wood Group chief executive Robin Watson has previously said the firm will retain its Aberdeen headquarters.

In calculating the cost savings, the Wood Group board has assumed that “Amec Foster Wheeler’s support function activities, such as Finance and HR, will transition on to Wood Group’s existing systems”.

The all-share deal for Amec has been unanimously recommended by both company boards. If shareholder and regulatory approvals are forthcoming, the deal is expected to complete in the second half of this year.

The takeover is expected to incur a one-off cost of £190m over the first three years.

A spokesman added: “Aside from the one-off costs referred to above, the Wood Group directors do not expect any material dis-synergies to arise in connection with the combination.”

Unite regional officer John Boland said: “It is incredibly disappointing that the company are making public statements about efficiency savings, without first speaking to workers and their representatives about what that means.”

Amec Foster Wheeler technicians at work.