AMEC eyes Foster Wheeler

UK-based engineering and project management firm AMEC has said it has made a provisional offer to buy Switzerland-headquartered Foster Wheeler AG for US$3.2 billion.

Foster Wheeler is an international engineering, construction and project management contractor, and power equipment supplier. The board of AMEC says it believes the combination of the AMEC and Foster Wheeler businesses is a compelling proposition for all shareholders.

The deal would be through a cash and share offer for all of Foster Wheeler's issued and to be issued share capital.>Foster Wheeler shareholders would receive approximately 0.9 new AMEC shares and US$16.00 in cash, together representing $32 for each Foster Wheeler share.

  • The possible offer amounts to about $3.2 billion (£1.9 billion).
  • AMEC said key benefits of the proposed combination would be:
  • Positioning AMEC to serve across the whole oil and gas value chain, adding mid- and downstream capabilities to AMEC's existing upstream focus, and bringing new customer relationships.

 

  • Improved geographic footprint, more than doubling AMEC's current revenues in the growth regions, increasing AMEC's Latin America exposure, and bringing scale benefits.
  • Annual cost synergies, estimated by AMEC to be at least $75 million, and additional significant tax and revenue synergies.
  • Retaining AMEC's low-risk and cash generative business model. Foster Wheeler has a similar business model, with predominantly cost-plus contracting and an asset-light engineering and project management business.
  • Combining two highly skilled workforces with industry-leading engineering and project management expertise
  • Adding a robust and profitable power equipment business with a solid backlog of orders.

AMEC CEO Samir Brikho said: "The combination of our two businesses, AMEC and Foster Wheeler, would be financially and strategically attractive. As well as positioning us across the whole oil & gas value chain and providing scale in our Growth Regions, we would expect double-digit earnings enhancement in the first twelve months. I believe it would be a compelling proposition for our shareholders, customers and employees.

The making of a firm offer remains subject to a number of pre-conditions, including the satisfactory completion of confirmatory due diligence by both parties, completion of debt financing arrangements by AMEC, unanimous recommendation by the board of Foster Wheeler, and the negotiation of definitive agreements satisfactory to both AMEC and Foster Wheeler.

Foster Wheeler has agreed not to solicit alternative proposals until February 22, 2014, by which time it is expected that definitive agreements will be entered into. Completion is anticipated in the second half of 2014, subject to AMEC shareholder approval and regulatory and anti-trust approvals. However, there is no certainty that a firm offer will be made or that the transaction will proceed.

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