Britain's competition watchdog today said John Wood Group's proposed acquisition of Amec Foster Wheeler could reduce competition for oilfield services in the UK.
The Competition and Markets Authority (CMA) was concerned the merger would reduce competition for engineering and construction services and operation and maintenance services on the UK continental shelf in the North Sea.
Wood Group agreed to buy Amec for £2.2bn in March, but the CMA said the companies are currently two of the main suppliers for the UK's upstream offshore oil and gas sector, and their merger would remove rivalry between two of the four main suppliers.
The CMA will refer the case for an in-depth phase two investigation unless the companies address its concerns by 9 August.
Wood Group today said it had previously made a proposal to the CMA in anticipation of potential competition concerns, and it will now formally submit a remedy proposal that it and Amec consider sufficient.
Kate Collyer, deputy chief economic adviser at the CMA and the decision maker in this case, said the initial investigation showed that customers' ability to obtain competitive bids could be significantly reduced, which could lead to increased prices.
The CMA’s team will continue to work constructively with the Wood Group and Amec Foster Wheeler in the assessment of the remedies that they intend to formally offer to address these concerns.
This merger will, however, warrant an in-depth investigation, unless the companies offer suitable proposals to address our concerns.
Robin Watson, chief executive of Wood Group, and Jon Lewis, chief executive of Amec, both said they remain committed to completing the transaction in the fourth quarter of this year.