Wood Group to acquire Amec in $2.7 billion all-share deal

Bloomberg

John Wood Group Plc agreed to acquire Amec Foster Wheeler Plc in an all-share deal that values the UK engineering-service provider at about 2.23 billion pounds ($2.7 billion). The shares of both companies surged.
The takeover comes after several years of pressure on profits for service providers in the energy industry as the slide in oil prices forced clients to rein in spending and defer large projects. By merging, these engineering companies aim to cut costs, diversify and become more competitive. Among recent deals, General Electric Co. agreed in October to merge its oilfield-services arm with Baker Hughes Inc.
“Wood Group becomes a larger, more diversified and higher-scale business in terms of global presence,” said James Hubbard, a London-based analyst with Numis Securities Ltd. “The implicit price is 10 times consensus-estimate earnings for this year for Amec. That’s bang in line for historic trading average and most would say that’s a perfectly reasonable price to pay.”
Amec stockholders will receive 0.75 new Wood Group shares for each Amec share they hold, Aberdeen, Scotland-based Wood Group said Monday. Based on the March 10 closing price, that represents a premium of almost 29 percent to the 30-day average, according to a statement.
Wood Group shares rose as much as 8 percent and were up 4.5 percent at 785.5 pence as of 10:58 a.m. in London. Amec jumped as much as 23 percent, the most in more than 20 years.

‘TRANSFORMATIONAL’ DEAL
The takeover, Wood Group’s biggest, will create a company with a market value of about $6 billion, making it among the largest oil-services companies in Europe, ahead of Saipem SpA and Petrofac Ltd. The deal is expected to boost adjusted earnings per share in the first full year, according to the statement.
“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, who will retain that position in the combined group.
Robin Watson and David Kemp, chief executive officer and chief financial officer of Wood Group respectively, will also remain in these roles. Four members of Amec’s board will join the new board.