Amec Foster Wheeler has agreed to a £2.2bn takeover by Wood Group in a deal that brings together two of the UK’s largest energy services companies.
Wood Group hopes to cut £110m in costs out of the combined business, which will provide services to oil and gas, chemicals and mining sectors.
The deal will create a company with a combined value of about £5bn.
Shares in Amec soared 18.3% to 579p, while Aberdeen-based Wood Group’s shares climbed 6.8%.
Wood Group is offering 564p a share for its British rival.
The deal has emerged at a difficult time for both businesses amid continued oil price volatility.
Amec was due to raise £500m through a rights issue next week, although this has now been suspended.
The money was to be used to cut its £1bn debt and fund a reorganisation of the company, which was formed through the merger of Amec and the US’s Foster Wheeler three years ago.
Amec also announced on Monday that last year’s revenues fell 8% to £5.4bn after “continuing weakness” in the oil and gas market offset strong performances elsewhere in its business. That weakness was also partly responsible for a fall in profit to £318m from £374m.
In February, Wood Group revealed a revenues had fallen 16% last year to $4.9bn, while pre-tax profit halved to $66m.
The company has been shedding staff and last year it cut around 18% of its employees.
Under the terms of the deal, Amec shareholders will end up with 44% of the larger group. The management of Wood Group – chief executive Robin Watson, finance chief David Kemp and chairman Ian Marchant – will continue in their roles following completion of the deal.
Wood Group chairman Ian Marchant said: “The combination extends the scale and scope of our services, deepens our existing customer relationships, facilitates further development of our technology-enabled solutions and broadens our end market, geographic and customer exposure.
“Delivering significant sustainable synergies will also result in a leaner and more competitive combined group, creating value for shareholders.”