Wood Group makes $2.7B takeover offer for Amec Foster Wheeler

UK-based energy services company Wood Group has made an offer to acquire its compatriot consultancy, engineering and project management company, Amec Foster Wheeler. 

The two companies said on Monday they have agreed the terms of a recommended all-share offer by Wood Group to acquire the entire issued and to be issued share capital of Amec Foster Wheeler.

Under the terms of the combination, each Amec Foster Wheeler shareholder will receive for each Amec Foster Wheeler share 0.75 new Wood Group shares.

Based on the closing price of £7.52 per Wood Group share on March 10, 2017, the terms of the combination value the issued and to be issued share capital of Amec Foster Wheeler at approximately £2.225 billion ($2.72B).

The combination will result in Amec Foster Wheeler Shareholders owning approximately 44 percent of the share capital of the combined group and sharing in the benefits accruing to the combined group via the realization of significant cost and revenue synergies.

Robin Watson and David Kemp, currently CEO and CFO of Wood Group respectively, will continue as CEO and CFO of the combined group. Ian Marchant will continue as Chairman of the combined group.

Four members of the Amec Foster Wheeler Board will join the board of the Combined Group upon completion of the Combination as non-executive directors, with Roy Franklin joining as Deputy Chairman and Senior Independent Director.

Commenting on the announcement, Ian Marchant, the Chairman of Wood Group said: “The combination will create an asset-light, largely reimbursable business of greater scale and enhanced capability, diversified across the oil & gas, chemicals, renewables, environment & 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 capitalize on growth opportunities across a broad cross section of energy and industrial end markets.”

He added: “Amec Foster Wheeler’s shareholders will become shareholders in the combined group, thereby gaining from the enhanced operating capabilities, and benefiting from a share of the synergies, a stronger balance sheet and Wood Group’s progressive dividend policy.

“The Wood Group Board is confident that the combination will build on the individual platforms of Wood Group and Amec Foster Wheeler to the benefit and advantage of customers, employees and other stakeholders. The combination has been unanimously recommended by the boards of Wood Group and Amec Foster Wheeler, and the Wood Group team looks forward to working with the Amec Foster Wheeler team to further develop the combined group over the longer term.”

Merger to help ‘realize full potential’ of both companies 

Commenting on the combination, John Connolly, the Chairman of Amec Foster Wheeler said: “Since the arrival of Jonathan Lewis as CEO, the executive management team of Amec Foster Wheeler has made significant progress towards the transformation of the business. This has been achieved through cost reduction initiatives, the disposal of non-core assets and a reorganization of the business. The Amec Foster Wheeler board have fully supported the revised strategy and the preparations to deliver the appropriate balance sheet to support the standalone prospects of Amec Foster Wheeler.

“However, the Amec Foster Wheeler Board believes that a combination with Wood Group adds to the standalone prospects of Amec Foster Wheeler, by accelerating the delivery of the future value inherent in the Amec Foster Wheeler business and, at the same time, helps to realize the full potential of each of Amec Foster Wheeler and Wood Group. The all-share structure of the offer allows our shareholders to benefit from the significant synergies and other strategic benefits that are expected to be realized from the combination.

“Amec Foster Wheeler will also be well represented on the board of the combined group, with four of our directors joining the combined group’s board, including Roy Franklin, who will be appointed Deputy Chairman and Senior Independent Director.”

The combination is subject to, inter alia, the receipt of the relevant clearances from competition authorities in Australia, Canada, Kazakhstan, Turkey, and the United Kingdom and the US, in addition to certain foreign investment and other approvals including under the CFIUS regime in the US.