WOOD Group has made an opportunistic £2.2 billion takeover bid for one of its biggest rivals, Amec Foster Wheeler, which it said will result in job losses but declined to indicate where the axe will fall.
The Aberdeen oil services giant announced the terms of an all share offer for Amec Foster Wheeler which has been recommended by that company’s board.
The deal, which requires approval by shareholders in both firms, would be Wood’s biggest ever.
Wood Group chief executive Robin Watson said it will create a global project engineering and technical services player with big positions in attractive markets.
However the company made clear a big part of the attraction of the takeover was the opportunity it would create to squeeze at least £110 million annual costs out of the enlarged group.
Mr Watson told reporters: “Will there be job losses manifest in the synergies? There will be, we are largely people oriented businesses.” Asked where jobs would be cut, he added: “It would be inappropriate to put a number to that at this stage. We are very early in our integration planning.”
Mr Watson said Wood Group has no plans to move its headquarters from Aberdeen following the deal.
However, as Wood and AFW have big North Sea operations run from Aberdeen there will be fears the takeover could result in heavy job cuts in the city.
Unite regional officer John Boland said the trade union had concerns about two of the largest employers in the North Sea combining and the implications for jobs in the area.
Wood and AFW have already made big cuts in their North Sea operations in response to the sharp fall in activity amid the crude price plunge which started in 2014.
Wood employs around 7,200 in the UK. AWF did not disclose North Sea employee numbers. It had 4,500 workers in the area last March.
Mr Watson noted the deal would help reduce the company’s reliance on oil and gas work. AFW has big operations in sectors such as environmental and infrastructure engineering.
He said Wood had decided last year that it was well placed to do a sizeable deal after completing a big restructuring.
Wood felt AFW was an attractive business that was facing challenges around financial structuring.
Wood’s chief financial officer David Kemp said there was a “real window of opportunity” in the first quarter in respect of a bid for the firm. He noted AFW had been planning to complete a £500 million rights issue and has suspended dividend payments to help strengthen its balance sheet.
Wood said AFW’s shareholders should benefit under its progressive dividend policy.
The 12 per cent rise in AFW’s shares yesterday suggested investors liked the look of the deal.
Wood is proposing to offer 0.75 of its shares for every AFW share. Based on the closing price of 752p on Friday for Wood shares this represents a 15.3 per cent premium to the 489p closing price of AFW shares on that day.
Wood shareholders will own 56 per cent of the enlarged group. Mr Watson will be chief executive with Mr Kemp chief financial officer. Wood’s chairman Ian Marchant will chair the group.
North Sea veteran Roy Franklin will become deputy chairman. Three other members of AFW’s board will become non-executive directors. They were not named yesterday.
AFW’s chief executive, Jonathan Lewis, initiated a strategy review after taking charge in June.
His predecessor Samir Brikho masterminded Amec’s £2bn takeover of Foster Wheeler in 2014 then found the crude price plunge take a toll on the enlarged business.
AFW had been seen as a likely bidder for Wood Group.
It said yesterday progress on a £100m cost reduction programme had been offset by ongoing challenging oil and gas market conditions. Chairman John Connolly said combining with Wood Group would add to AWF’s standalone prospects.
Mr Watson said the enlarged group would rely on oil and gas for 60 per cent of its business. Wood earns 80 per cent of its revenues in that market.
Wood’s biggest previous deal was the £630 million takeover of PSN in 2010 which increased its exposure to the North Sea.
AFW shares closed up 56.8p at 546p. Shares in Wood Group closed up 10.5p at 762.5p.
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