Oil and gas: AMEC makes offer for Foster Wheeler acquisition

Source:AMEC

The board of AMEC believes the combination of the AMEC and Foster Wheeler businesses is a compelling proposition for all shareholders.  AMEC, the international engineering and project management company, announces that it has provisionally agreed with Foster Wheeler AG (Foster Wheeler) the outline terms for a recommended cash and share offer for all of Foster Wheeler's issued and to be issued share capital. Foster Wheeler shareholders would receive approximately 0.9(1) new AMEC shares and $16.00 in cash, together representing $32.00 for each Foster Wheeler share (the 'possible offer'). The possible offer equates to a value of approximately $3.2 billion (£1.9 billion) (2).

Foster Wheeler is an international engineering, construction and project management contractor and power equipment supplier. The board of AMEC believes the combination of the AMEC and Foster Wheeler businesses is a compelling proposition for all shareholders.

The cash component of the possible offer ($1,595 million, £968 million) is expected to be financed by a combination of AMEC's existing cash resources and new debt financing.

AMEC expects the remainder of the offer to be satisfied by the issuance of new AMEC shares to Foster Wheeler shareholders, some or all of which may take the form of American Depositary Receipts. AMEC will seek a US listing in connection with the transaction.

If the possible offer is completed on the terms outlined above, Foster Wheeler shareholders would hold shares in AMEC representing approximately 23 per cent of its enlarged share capital, and AMEC would expect to have a pro-forma trailing 12 months ratio of net debt to EBITDA of approximately 1.6 times at completion. Foster Wheeler also expects to pay a pre-completion dividend of $0.40 for each Foster Wheeler share.

On completion of the transaction, two non executive directors of Foster Wheeler are expected to join the AMEC board.

AMEC takes a disciplined approach to acquisitions, with clearly defined strategic and financial criteria. Double-digit earnings accretion is expected in the first 12 months, with ROIC expected to exceed the cost of capital in the second 12 months period, after completion.

Key benefits of the proposed combination would include:
- Positioning AMEC to serve across the whole oil and gas value chain, adding mid and downstream capabilities to AMEC's existing upstream focus and bringing new customer relationships
- Improved geographic footprint, more than doubling AMEC's current revenues in the Growth Regions, increasing AMEC's Latin America exposure and bringing scale benefits
- Annual cost synergies, estimated by AMEC to be at least $75 million, and additional significant tax and revenue synergies
- Retaining AMEC's low-risk and cash generative business model. Foster Wheeler has a similar business model, with predominantly cost-plus contracting and an asset-light engineering and project management business
- Combining two highly skilled workforces with industry-leading engineering and project management expertise
- Adding a robust and profitable power equipment business with a solid backlog of orders.

AMEC Chief Executive Samir Brikho said: "The combination of our two businesses, AMEC and Foster Wheeler, would be financially and strategically attractive. As well as positioning us across the whole oil & gas value chain and providing scale in our Growth Regions, we would expect double-digit earnings enhancement in the first twelve months. I believe it would be a compelling proposition for our shareholders, customers and employees."

The making of a firm offer remains subject to a number of pre-conditions, including the satisfactory completion of confirmatory due diligence by both parties, completion of debt financing arrangements by AMEC, unanimous recommendation by the board of Foster Wheeler and the negotiation of definitive agreements satisfactory to both AMEC and Foster Wheeler. Foster Wheeler has agreed not to solicit alternative proposals until 22 February 2014 by which time it is expected that definitive agreements will be entered into. Completion is anticipated in the second half of 2014, subject to AMEC shareholder approval and regulatory and anti-trust approvals. However, there is no certainty that a firm offer will be made or that the transaction will proceed.



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