UK oil services companies John Wood Group and Amec Foster Wheeler in £5bn merger deal

William Turvill
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John Wood Group has announced a takeover deal for Amec Foster Wheeler (Source: Getty)

Two UK oil services firms have agreed to a £5bn merger.

John Wood Group announced this morning it had agreed a takeover deal for FTSE 250-listed Amec Foster Wheeler.

Amec’s share price jumped 18 per cent to £5.76 at the time of writing, while John Wood’s was up eight per cent to £8.10.

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Wood Group said its directors believe the merger can “achieve significant sustainable cost synergies of at least £110m” per year.

The chief executive, chief financial officer and chairman of Wood Group will continue in their roles under the firms of the deal, while four Amec Foster Wheeler board members will join the board of the combined group.

“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 and infrastructure and mining segments,” Wood Group chairman Ian Marchant said.

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.

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Under the terms of the deal, Amec Foster Wheeler shareholders will receive 0.75 new Wood Group shares for each of their shares.

The company has ascribed a value of £5.64 per Amec Foster Wheeler share, representing a 28.7 per cent premium on a 30-day average of £4.53, or a 15.3 per cent premium based on Friday’s closing price, £4.83.

Based on Wood Group’s closing price on Friday, £7.52, the terms of the deal values Amec Foster Wheeler at around £2.2bn. Under the terms of the deal, Amec Foster Wheeler shareholders would own around 44 per cent of the combined company.

Behind the deal

JP Morgan Cazenove advised Wood Group on the takeover, with Michael Wentworth-Stanley, managing director of the UK business, and Dag Skattum, vice chairman of investment banking, leading the team.

Wenthworth-Stanley has been MD at the bank since 2005, having begun his career as a chartered accountant in 1974. Skattum reportedly started his career at JP Morgan in 1986 before leaving for private equity firm TPG in 2007 and then returning in his current role in 2014.

Credit Suisse is also working on the buyside as financial adviser and corporate broker. On the Amec Foster Wheeler side, Goldman Sachs is financial adviser, Bank of America Merrill Lunch is financial adviser and corporate broker and Barclays is financial adviser and corporate broker.

JP Morgan is celebrating a hat-trick of big UK deals this year, with bankers also working on the Aberdeen Asset Management-Standard Life tie-up and the Tesco-Booker merger.

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