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UK Wood Group to Buy Rival Firm for $2.7b

UK Wood Group to Buy Rival Firm for $2.7bUK Wood Group to Buy Rival Firm for $2.7b

British oilfield services company John Wood Group has agreed to buy Amec Foster Wheeler in a deal valuing its smaller rival at about $2.7 billion and averting a planned $600 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, Reuters reported.

The paper deal valued Amec Foster Wheeler shares at 5.64 pence each and they traded close to that level. Wood Group shares also responded positively, gaining 5% to $10.

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 cash flow. 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 own 44% 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 $135 million, while the one-off costs would be around $230 million.

 

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