Wood Group’s proposed £2.2bn takeover of Amec Foster Wheeler has moved a step closer to completing this year after the Competition and Markets Authority (CMA) accepted in principle a remedy to sell some UK assets.
In March 2017, Wood Group struck a transformational deal to acquire Amec Foster Wheeler in a transaction that values the North West-based engineering group at approximately £2.2bn. Since then, the CMA has been considering proposals to overcome competition concerns regarding the transaction.
Both companies provide engineering services to the UK’s upstream oil and gas sector in the continental shelf. The CMA conducted an investigation into the proposed merger and found competition concerns in the supply of engineering and construction services and operation and maintenance services in the UK.
In order to address the CMA’s competition concerns, the companies have offered to sell off almost all of Amec Foster Wheeler’s assets which contribute to these services in its upstream offshore oil and gas business in the UK.
The CMA now considers there are reasonable grounds for believing that these undertakings, or a modified version of them, might be acceptable and it will open a public consultation on the offer in due course. If the CMA does not accept the undertakings proposed, the merger will be referred for an in-depth investigation.
Kate Collyer, deputy chief economic adviser and decision maker in this case, said: “It is crucial that competition is maintained in this major UK industry. We will consider the undertakings offered by Wood Group and Amec Foster Wheeler further, and carefully consult interested parties, in order to make sure that they fully address our concerns.”
The CMA has until 12 October 2017 to consider whether to accept the offer with the possibility of extending the deadline until 7 December 2017 in special circumstances.
Wood Group said that the M&A process for the proposed remedy is already at an advanced stage. Amec Foster Wheeler commenced a formal marketing process in May, which has attracted interest and is progressing well, it added.
The CMA in its provisional decision does not require the parties to complete the sale of the remedy business in advance of completing the combination. As a result, Wood Group and Amec Foster Wheeler continue to expect their combination to complete in the fourth quarter of 2017.
Jon Lewis, chief executive at Amec Foster Wheeler, said “We welcome the announcement by the CMA. Our offer of a proposed remedy in May and the early commencement of the sale process to potential buyers of the upstream oil and gas business has ensured we have navigated this process ahead of schedule, increasing the likelihood that the transaction with Wood Group will close in quarter four this year.”
Robin Watson, chief executive of Wood Group, said “Today’s announcement is an important milestone and gives us further confidence in our ability to complete the transaction in quarter four this year.”
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