By BRIAN SWINT
Amec, the second-biggest UK oil and gas engineer, agreed to
buy US-traded Foster Wheeler for $3.2 billion to expand
foreign and fuel-product business.
The provisional deal will give Foster Wheeler investors $16
in cash and 0.9 of a new Amec share, equivalent to a total of
$32 for each share they hold, the London-based company said
in a statement. It will seek a US listing after the purchase.
The transaction will boost capacity in the oil products and
business at Amec,
now mainly focused on helping companies get oil and gas out
of the ground. Foster Wheeler has worldwide operations and
has been working in Saudi Arabia and the United Arab Emirates
since the 1970s, according to its website. Amec is valued at
3.2 billion pounds ($5.3 billion).
The most important thing this deal is about, if you
look at gas prices and monetization, is growing markets in
the US and the Middle East, CEO Samir Brikho said on a
call. This deal enhances our positions in both.
The takeover will see Amecs revenue in growth
regions doubling. Profit will rise at least 10% in the
first year and returns exceed the cost of capital in the
second, it said.
The cash part of the deal will cost about 1 billion pounds,
and the company currently has about 100 million pounds of
cash, chief financial officer Ian McHoul said on the call.
Amec will use current funds and new debt for that portion of
Foster Wheeler, based in Zug, Switzerland, had a market value
of $3.1 billion at the end of last week after gaining 25% in
the fourth quarter, when talks with Amec and Petrofac, the
largest UK oil services provider, were reported.
Amecs offer represents a 0.6% premium over the 20-day
average price, compared with a 32% premium for global oil and
gas services deals in the past year, according to data
compiled by Bloomberg.
The fact that there is no real premium offered to
shareholders is not really surprising as takeover rumors made
the round already, said Geoffroy Stern, a Kepler
Cheuvreux analyst in Paris. We do not believe in a
counter bid from any competitor as Foster Wheeler has been
for sale for a while.
Amec expects to close the deal, subject to conditions, in the
second half. Foster Wheeler, which would take two seats on
the UK board, agreed not to seek out other offers before Feb.
22, when agreement on the final terms is expected, Amec said.
The engineers offer of as much as 680 million pounds in
August for Kentz Corp., to expand its energy construction
business, was rejected by the Irish company.
Amec also said the pounds rise against the dollar will
curb its earnings before interest, tax, depreciation and
amortization this year by about 10 million pounds. Gains from
Foster Wheeler wont be fully realized this year so Amec
wont meet targeted earnings per share of 100 pence in
2014, it said.
Bank of America-Merrill Lynch advised Amec on the deal, while
JPMorgan Chase & Co. advised Foster Wheeler.