UK Regulator Accepts Remedy Proposals for Wood Group’s Acquisition of Amec Foster Wheeler

September 12, 2017

Britain’s antitrust regulator said on Tuesday it won’t refer the merger between oil services companies Wood Group (WG.L) and rival Amec Foster Wheeler (AMFW.L) to a deeper, second-phase investigation after they offered to sell a range of Amec Foster Wheeler businesses.

The Competition and Markets Authority (CMA) raised competition concerns regarding the overlaps between the two companies’ engineering and construction services and operation and maintenance services.

Aberdeen, Scotland-based Wood Group offered in March 0.75 new Wood Group shares for each share of Amec Foster Wheeler, valuing Amec’s share capital at 2.23 billion pounds ($2.95 billion).

Under the proposals to allay the CMA’s concerns and secure a regulatory approval, Amec pledged to divest substantially all the assets, personnel and liabilities that contribute to its UK upstream offshore oil and gas engineering and construction and operation and maintenance businesses in the UK, serving UK-based customers. It also agreed to sell all other assets, personnel, and liabilities in its onshore pipeline business in the UK serving UK clients.

“The CMA is now satisfied the issues it identified will be fully addressed by the remedy offered,” the CMA said in a statement. The assets to be divested will now be sold to a buyer approved by the CMA.

Wood Group said in April it expects at least 150 million pounds of costs savings per year from the deal by the end of the third year following the completion of the transaction. The company estimated that realizing these cost efficiencies will incur a one-off cost of about 190 million pounds in the first three years after closing the deal. It said then that it may identify further cost reductions, which it couldn’t immediately quantify, and may see an increase in revenue as a result of the combination.

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By Caroline Williams

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