Engineering news
Aberdeen-based Wood Group hopes to cut £110 million in costs out of the combined business, which will provide services to oil and gas, renewables, environment and infrastructure and mining sectors. Significant additional growth opportunities will be achieved by the combined group, Wood Group added.
Both business have fallen on hard times in recent years amid continued oil price volatility. In February, Wood Group reported 16% fall in revenues to £4 billion for 2016, while its pre-tax profit halved to £54 million. As a result, the company cut about 18% of its staff.
Amec announced today that its revenues for last year fell 8% to £5.4 billion after "continuing weakness" in the oil and gas sector offset strong performances elsewhere in its business. Its profit fell to £318 million from £374 million a year earlier.
Amec had been due to raise £500 million through a rights issue next week, which has now been suspended. The money was to be used to reduce its £1 billion debt and fund a reorganisation of the company, which was formed through the merger of Amec and the US's Foster Wheeler three years ago.
"The combination represents a transformational transaction for Wood Group, which accelerates our strategy and creates a global leader in project, engineering and technical services delivery across a range of industrial sectors,” said Wood Group chairman Ian Marchant. “The combination extends the scale and scope of our services, deepens ur existing customer relationships, facilitates further development of our technology-enabled solutions and broadens our end market, geographic and customer exposure”
John Connolly, the chairman of Amec, added: "The board believes that a combination with Wood Group adds to the standalone prospects of Amec Foster Wheeler, by accelerating the delivery of the future value inherent in the Amec Foster Wheeler business and, at the same time, helps to realise the full potential of each of Amec Foster Wheeler and Wood Group."
Robin Watson and David Kemp, currently chief executive and chief financial officer of Wood Group respectively, will continue in their roles in the combined group. Ian Marchant will continue as chairman of the combined group.
The takeover is subject to clearances from competition authorities.
Meanwhile, Amec has secured a £125 million contract renewal to provide long-term support to EDF Energy Nuclear Generation. Amec will continue its operational support for the UK reactor fleet under the Technical Support Alliance 3 (TSA3) agreement, which began more than 50 years ago. The five-year agreement, which has an option to extend for a further five years, follows Amec's partnership with EDF Energy under two similar frameworks - TSA1 and TSA2.
TSA3 will play a key role in major station upgrades and enhancements, compliance-related activities, and fleet-critical projects. Amec Foster Wheeler will draw on the unique capabilities of its engineers, safety specialists and subject matter experts, and the largest commercial laboratory and test rig complex serving the UK nuclear industry.
"Amec Foster Wheeler has worked in partnership with EDF Energy for a number of years and shares our vision for zero harm, exceptional nuclear safety performance, and world record-breaking results," said EDF Energy's managing director generation Stuart Crooks. “The support of all our strategic partners is an important factor as we continue to operate our nuclear stations to the highest standards."
Amec expects the contract to generate annual revenues of between £25 million and £30 million.