Wood Group offers sale of Amec’s North Sea unit to ease approval

Wood Group, the UK oilfield services company, has offered to sell “the majority” of Amec Foster Wheeler’s oil and gas business in the North Sea, in an attempt to secure competition clearance for its proposed £2.2bn takeover of its rival.

The move, revealed in a prospectus published late on Tuesday, is likely to raise serious concerns over jobs in the North Sea, which has suffered sharp falls in employment since the oil price crash in 2014. 

Aberdeen-based Wood Group made an all-share offer for Amec in March, just over a week before the target company had been due to launch a £500m rights issue and suspend dividend payments to tackle its £1bn of debt.

Amec’s North Sea upstream business, which provides services such as maintenance to energy companies operating in the waters off Aberdeen, employs 4,200 people. It describes itself as a “clear leader” in the region and has customers including BP, Engie, ConocoPhilips and Repsol.

North Sea employment, including jobs in the supply chain, has fallen by a quarter since 2013 to 330,400 at the end of 2016, according to Oil & Gas UK, a trade body.

Wood Group’s prospectus details its offer to the UK’s competition watchdog to sell the majority of the unit, which generated £740m in revenue and £42m in earnings before interest, tax, depreciation and amortisation last year. 

The Competition and Markets Authority launched a so-called phase one investigation into the deal this month, which invites interested parties to express any concerns before it decides whether or not to launch a full inquiry.

In the prospectus, Wood Group says it believes the proposal will “be sufficient” to obtain clearance for the deal from the CMA. 

“The terms of any disposal will be subject to approval from the CMA, and any disposal will only be completed provided the combination is implemented,” it adds.

Wood Group has revised up its estimate of potential savings it could achieve through the combination with Amec, from £110m a year originally to £165m a year, three years after completing the tie-up.

The deal would reduce Wood Group’s dependence on the oil and gas industry — Amec’s diverse operations also include working for government defence departments and advising on Heathrow’s third runway campaign.

Wood Group on Tuesday reiterated its belief that the tie-up would create a “global leader” in areas such as project management, engineering and technical services “across a broad range of industrial markets”. The acquisition will be put to a shareholder vote next month.

Global oilfield services companies have suffered from sharp declines in activity since the oil price slump in 2014, while their energy customers have also put pressure on them to reduce prices.

This has led to a wave of consolidation, particularly in the US. Deals include the acquisition of Cameron by Schlumberger, the merger of Technip and FMC Technologies and the merger of General Electric’s oil and gas division with Baker Hughes, which is yet to complete.