We said last week that oil services firm Amec Foster Wheeler (AMFW) was looking too cheap and it appears we weren’t the only ones with a positive view. Wood Group (WG.) has tabled an all-share bid at a 15% premium to Friday’s close.
Amec is supportive of the approach and gains 19.2% to 583p; Wood is up 7.5% to 808.5p.
WHAT ARE THE TERMS?
If the £2.2bn merger goes through, Wood’s shareholders would own two thirds of the combined entity. We are surprised there haven’t been more industry consolidation efforts in the wake of the downturn in the oil sector.
The enlarged group is expected to achieve sustainable cost synergies of at least £110m.
The news overshadows a full year trading update from Amec which reveals an 8% decline in revenue on a like-for-like basis to £5.4bn, reflecting continuing struggles in oil and gas.
The order book is also down £400m from the half year level at £5.8bn but the company points to contract wins since the year-end not reflected in the order book.
RIGHTS ISSUE SHELVED
Interestingly the company had been planning a rights issue of £500m to accompany its 2016 results and investor day on 21 March. Those plans are suspended in light of Wood’s offer.
For its part Wood expects the deal to be earnings accretive in the first full year after the transaction completes.
Chairman Ian Marchant comments: ‘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 & infrastructure and mining segments.’
