Wood Group Bids $2.7 Billion For Rival Amec Foster Wheeler

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Scotland's oil and gas engineering giant Wood Group plc (LSE:WG) (Aberdeen, Scotland) has announced a £2.2 billion ($2.7 billion) takeover of its debt-ridden rival, Amec Foster Wheeler PLC (NYSE:AMFW) (London, England).

The all-share offer will give Amec Foster Wheeler a 44% share in the combined company and the deal has been unanimously recommended by the boards of both companies. The deal will create one of the world's largest engineering groups servicing the power, oil, gas, mining and chemicals sectors.

Amec Foster Wheeler has been struggling with more than £1 billion ($1.2 billion) in debt since its ill-fated takeover of U.S. company Foster Wheeler in 2014 for $3.2 billion. For additional information, see January 16, 2014, article--Amec's $3.2 Billion Acquisition of Foster Wheeler Fits Complementary Markets, Strengths.

Like many companies in the oil sector, Amec Foster Wheeler was hit hard by the collapse of crude oil prices in 2014, which has seen most players implement cost-cutting measures, including asset sales and redundancies. Last week, Amec Foster Wheeler announced plans to sell its Global Power Group (GPG) in an effort to reduce its debt and cut non-core assets. GPG designs, supplies and installs circulating fluidized bed (CFB) boilers, a range of steam generators and air pollution control equipment.

Ian Marchant, the chairman of Wood Group said: "The combination accelerates our strategy and creates a global leader in project, engineering and technical services delivery across a range of industrial sectors. It extends the scale and scope of our services, deepens our existing customer relationships, facilitates further development of our technology-enabled solutions and broadens our end market, geographic and customer exposure. It 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."

John Connolly, chairman, Amec Foster Wheeler, added: "Since the arrival of Jonathan Lewis as chief executive officer, the executive management team has made significant progress towards the transformation of the business. This has been achieved through cost reduction initiatives, the disposal of noncore assets and a reorganisation of the business. However, the Board believes that a combination with Wood adds to the standalone prospects of the Company, by accelerating the delivery of the future value inherent in the Amec Foster Wheeler business and, at the same time, helps to realise the full potential of each of Amec Foster Wheeler and Wood."

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