Wood Group’s £2.2bn takeover of its oilfield services rival Amec Foster Wheeler looks likely to gain UK competition clearance after it offered to sell the majority of the target company’s North Sea upstream oil and gas business.
The Competition and Markets Authority said on Tuesday it considered there were “reasonable grounds” for believing that the proposal — or a modified version of it — “might be acceptable”.
Amec has already started a sales process of the unit, led by its chief corporate development officer Rupert Green, and hopes to secure a deal by the end of next month or early October, although Wood Group specified in a statement on Tuesday that the CMA did not require a conclusion of the North Sea disposal process before its takeover of its smaller rival can complete.
Jon Lewis, chief executive of Amec, said last week that a “high quality list” of buyers was interested in the North Sea business, which generated revenue of £323m and a trading profit — which excludes factors such as financing expenses and impairments — of £34m in the first half of the year.
The CMA plans to hold a public consultation on the proposal before making a final decision by October 12. If the competition watchdog decides the remedy is insufficient, the takeover will be subject to an in-depth investigation.
Both Wood and Amec remain confident that the takeover will complete in the fourth quarter of this year.
Robin Watson, chief executive of Wood Group, called Tuesday’s announcement by the CMA an “important milestone” that gives the company “further confidence” it can conclude the takeover according to the original timetable.
Mr Lewis said the companies’ decision to offer a remedy in May — just two months after the £2.2bn takeover was announced — had allowed them to navigate the CMA process “ahead of schedule”.
Aberdeen-based Wood swooped on Amec just weeks before the latter was preparing to ask shareholders for £500m via a rights issue to boost its balance sheet and avoid a breach of its debt covenants with lenders.
The deal is the latest example of M&A activity in the global oilfield services industry, which has had a tough three years as oil and gas producers have cut activity and put pressure on services groups to reduce prices.
Other deals in recent years have included the merger of Baker Hughes with the oil and gas business of General Electric, Schlumberger’s acquisition of Cameron International and the merger of FMC Technologies and Technip.
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