WOOD Group looks to be getting closer to completing the blockbuster £2.2 billion takeover of Amec Foster Wheeler following moves to address the competition watchdog’s concerns about the impact of the deal on the North Sea.
The Competition and Markets Authority is concerned the takeover could leave Aberdeen-based Wood Group with a stranglehold on the market to provide services such as the maintenance of production facilities.
The CMA could cause major complications for Wood in the company’s attempts to complete a deal that bosses believe will provide a major boost to growth amid tough times in oil and gas markets.
However, it said yesterday there were reasonable grounds to believe a proposal by Amec Foster Wheeler to sell the bulk of its North Sea business might be acceptable.
Wood Group chief executive Robin Watson said the announcement was an important milestone that increased confidence in the company’s ability to complete the all-share takeover in the fourth quarter.
The landmark deal would result in a dramatic increase in the size of Wood Group and help the firm diversify into markets such as environmental engineering.
Mr Watson has moved to reduce Wood’s reliance on the oil and gas industry amid the downturn triggered by the sharp fall in crude prices since 2014.
Jon Lewis, chief executive of London-based Amec Foster Wheeler also welcomed the CMA statement.
Mr Lewis noted the company had started looking for buyers for the North Sea business in May. It recognised the recommended bid Wood made for the firm in March may raise competition issues.
“The early commencement of the sale process ... has ensured we have navigated this process ahead of schedule increasing the likelihood that the transaction with Wood Group will close in quarter four this year,” he said .
Amec Foster Wheeler said the sale process has attracted interest and is progressing well.
Short listed bidders are thought to include America’s KBR, Fluor and Jacobs and SNC Lavalin of Canada.
The CMA does not require Amec Foster Wheeler to complete the sale of the North Sea business before the takeover by Wood goes through.
It could still pose challenges in terms of the completion of the deal in the form envisaged by the two firms.
The CMA expects to make a final decision on whether to accept the proposed remedy by 12 October.
Kate Collyer, Deputy Chief Economic Adviser and decision maker in the case, said: “It is crucial that competition is maintained in this major UK industry. We will consider the undertakings offered by Wood Group and Amec Foster Wheeler further, and carefully consult interested parties, in order to make sure that they fully address our concerns.”
The CMA could insist on a time-consuming detailed investigation. It may propose other remedies.
Wood expects to retain the Amec Foster Wheeler business that works on the commissioning of new North Sea facilities, Qedi.
Potential buyers for the business Amec Foster Wheeler plans to sell would appear to be in a strong position.
The crude price plunge has prompted oil and gas firms to slash discretionary spending in the North Sea.
Last week Amec Foster Wheeler said profits had plunged by around 25 per cent at the North Sea unit that is for sale, to £34m in the six months to June.
Wood said recently that there had been a material drop in North Sea business in the first half.
Its takeover of Amec Foster Wheeler is expected to lead to around 1,200 job losses globally under plans to realise £165 million of synergies.
Shareholders in both firms gave strong backing to the deal in ballots completed in June.
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