WOOD Group has underlined its continuing diversification beyond its traditional oil and gas focus by unveiling the $44 million (£34m) deal to buy US car industry specialist CEC Controls Company.
Aberdeen-based Wood, which revealed on Tuesday that nearly 1,200 redundancies will arise from its £2.2 billion acquisition of Amec Foster Wheeler, said the deal would strengthen its presence in the Detroit automotive hub, while boosting its capability in automation and control.
It comes after Wood acquired the Automated Technology Group (ATG), a key independent supplier of control and power solutions for industrial automation in the UK, in September 2015. The ATG deal was heralded at the time as a significant diversification for Wood under a strategy to reduce its reliance on the oil and gas sector, then in the throes of severe downturn, with English-based ATG specialising in sectors such as car and food production.
Wood will pay an initial $44 million in cash for CEC with a total fixed consideration of $15m payable in cash over the next three years. CEC, which was established in 1996, employs more than 220 staff across 12 offices in North America and one in Romania. The company, whose clients include Ford, GM and Fiat-Chrysler, generated underlying earnings of $9.6m last year. Wood said that CEC would continue to be led by its existing leadership team.
Robin Watson, chief executive of Wood Group, said: “Bringing 50 years of expertise in delivering services to the automotive sector, CEC Control significantly strengthens the innovative technical solutions we provide to clients within automation and control.
“The acquisition supports the geographical broadening of our footprint within the automotive sector particularly in the US, deepening our presence in the key automotive hub of Detroit, where CEC Controls is headquartered.
“It also provides us the opportunity to further enhance the industrial process and control capabilities we have to offer to this industry and adjacent sectors, including aerospace, logistics, water and pharmaceuticals.”
Robert Scheper, president of CEC Controls, said: “Wood Group’s global footprint and breadth of capabilities offers us the opportunity to enhance our client solutions and access significant international growth opportunities.
“We believe our extensive expertise in the automotive manufacturing industry, married with Wood Group’s two decades of experience in automation and control, creates a powerful solution-driven service offering for clients.”
The CEC deal comes after Mr Watson said at the company’s annual meeting this month that he saw no sign of recovery in the North Sea, while talking up the benefits of its Amec Foster Wheeler tie-up.
In the prospectus for the Amec deal, Wood outlined its expectation that it would lead to an “overall potential reduction of approximately two per cent”. With Wood Group employing around 29,000 globally, and Amec having 30,900 on its books, a two per cent cut in headcount would result in 1,198 redundancies.
Wood says in the prospectus that the headcount reduction expected to achieve around 60 per cent of the £165m in annual savings the deal is now forecast to bring. Details on how and where the redundancies will take place have still to be finalised. Wood has proposed to offload the “majority of Amec Foster Wheeler’s upstream oil and as business located in the UK” among undertakings to ensure its approval from the Competition and Markets Authority.
Shares closed down 14p at 746.5p.
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