Amec to acquire Swiss rival Foster Wheeler for $3.13 bn

British FTSE 100 oil and gas engineering firm Amec yesterday finalised a friendly deal to acquire its Swiss rival Foster Wheeler for £1.9 billion ($3.13 billion).

After several on-off talks since the past year, Amec had last month said that it had provisionally agreed to buy Foster Wheeler for cash-and-shares.

Under the terms of the deal agreed yesterday by both companies, Amec will pay shareholders of Nasdaq-listed Foster Wheeler $16 in cash and 0.8998 new Amec shares for each Foster Wheeler share.

Based on Amec's closing share price of £10.92 on Thursday and exchange rate conversion, the offer is valued at about $33 per Foster Wheeler share.

Both companies have agreed to a £32.5 million break-up fee if they fail to complete the deal, and the transaction requires 80 per cent of Foster Wheeler shareholders to support the offer and anti-trust approvals from several global regulators including the European Commission.

Amec plans to fund the cash portion of the deal through a combination of its existing cash reserves and new debt financing.

Post closing, which is expected to close in the second half of 2014, Foster Wheeler's shareholders will own approximately 23 per cent of the merged company.

The merged company will have more than 40,000 employees, annual revenues of approximately $10 billion and backlog of orders of around $10 billion.

Separately, Foster Wheeler said that it expects to pay a one-time dividend of $0.40 per share prior to, and not conditional on, the closing of the offer.

The acquisition will enable Amec to serve across the whole oil and gas value chain and add mid and downstream capabilities to its existing upstream focus.

The deal will also improve its geographic reach, enabling it to double it's current revenues in the growth regions, and increase its exposure to Latin America.

Amec estimates annual synergies to be in the region of at least $75 million, as well as significant unspecified tax synergies.

Foster Wheeler, which is based in Zug, Switzerland for tax purposes and has its headquarters in Reading, UK, is a global engineering and construction company and power equipment supplier.

Its global engineering and construction group designs and constructs processing facilities for the upstream oil and gas, LNG and gas-to-liquids, refining, chemicals and petrochemicals, power, minerals and metals, environmental, pharmaceuticals, biotechnology and healthcare industries.

The company's global power group is a world leader in combustion and steam generation technology that designs, manufactures and erects steam generating and auxiliary equipment for power stations and industrial facilities and also provides a wide range of aftermarket services.

London-based Amec, whose clients include BP, Shell, EDF, National Grid, the US Navy and others, provides services and equipment to the oil and gas, mining, nuclear and renewable energy industries.

"The combination positions us across the whole oil & gas value chain, provides scale in our Growth Regions and is expected to be double-digit earnings enhancing in the first twelve months," said Samir Brikho, CEO of Amec.

Kent Masters, president and CEO of Foster Wheeler, said, ''Both companies have strategies that are highly focused on growth, and our combination will help deliver on Foster Wheeler's key strategic objectives: establishing material positions in upstream and minerals and metals, building positions in growth geographies and extending our services offering.''