Wood shakes up oil market with £2.2bn Amec deal

ENERGY: Transformatory oil services deal will lead to job losses as savings are sought

Energy services giant Wood Group is set to swallow up rival Amec Foster Wheeler in a £2.2 billion deal.

The combination, which will create a globally significant group with a workforce of 64,000 people and a value in excess of £5bn, is expected to take place later this year if approvals are forthcoming.

Wood Group’s recommended all-share offer for Amec Foster Wheeler will hand its shareholders a 44% stake in the enlarged company.

The pair expect to bear costs of £190 million over three years as the two group’s are brought together. However, the joined group expects recurring savings from “synergies” of at least £110m per annum in the same timescale.

Around 40% of the savings are expected to come from operational efficiencies, with 30% from corporate changes including the reduction of duplicate costs across board and executive leadership teams.

The final 30% of targeted savings will come from consolidation of overlapping office locations, the elimination of duplicated IT systems and the streamlining of other centralised functions.

Robin Watson and David Kemp, CEO and CFO of Wood Group respectively, will continue in the same roles within the combined group.

Four Amec Foster Wheeler board members will join the combined group’s executive, with Roy Franklin serving as deputy chairman and senior independent director.

Wood Group chairman Ian Marchant will head up the new board structure.

“The combination will create an asset-light, largely reimbursable business of greater scale and enhanced capability, diversified across the oil and gas, chemicals, renewables, environment and infrastructure and mining segments.”

“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.”

Details of the deal came as Amec Foster Wheeler reported an 8% slip in revenue to £5.4bn and a fall in profits from £374m in 2015 to £318m in 2016.

Amec chairman John Connolly said the board had fully backed CEO Jonathan Lewis’s vision to transform the business but said the merger with Wood would help to “realise the full potential” of both companies.

Top: Wood Group technicians at work. Above: Ian Marchant will chair the combined group.