Wood Group Wins Support For Amec Bid Despite Fraud Concerns
Wood Group’s £2.2bn bid to buy smaller oilfield services rival Amec Foster Wheeler is gaining support, despite the looming threat of a Serious Fraud Office investigation into the takeover target.
Both oil groups have been dragged into a global probe over alleged bribery, corruption and money laundering at Unaoil, which threatened to derail Wood Group’s “transformational” bid to tackle the downturn in the oil services industry.
Amec’s disclosure late last month that its co-operation with the SFO “may well develop into an investigation of Amec” threatened support for the deal by raising concerns of potentially eye-watering penalties.
But City sources close to the deal say Wood Group shareholders have been quietly assured that the offer made to Amec already had a potential SFO fine “baked into” the deal through a slightly lower offer price.
The Unaoil scandal first emerged in the press last year, providing ample time for dealmakers to assess Amec’s exposure.
Monaco-based Unaoil is alleged to have acted as a middle-man in setting up bribes between energy-rich states and oil companies seeking lucrative contracts.
Wood Group has also been linked to the scandal through a joint venture which had dealings with Unaoil in Kazakhstan, but denies any sign of wrongdoing have emerged from its ongoing internal investigation.
Sources expect “high levels of support” in the shareholder votes in mid-June after city analysts and proxy advisors ISS and Glass Lewis backed the strategic rationale for both parties.
Wood’s offer spared Amec from undertaking a radical turnaround programme which was set to include a major £500m rights issue and the suspension of dividends.
The group’s financial position was stretched by its takeover of Foster Wheeler in early 2014 but was then brought close to breaking point after the global oil price collapse later that year. Wood sweetened the deal for Amec shareholders further by promising a takeover would result in annual savings of £150m by its third year as a merged group.
Aberdeen-based Wood is also planning to sell off “the majority” of Amec’s North Sea assets to allay competition concerns within the basin.
James Hubbard, an analyst with Numis, said the takeover was “unlikely to be derailed”.
“We think it more likely than not that the acquisition will complete,” he said. ISS added that although it will keep the SFO probe under review, shareholders should vote in favour of the merger.
“Support for the transaction is warranted as the rationale to combine the two businesses that operate in largely adjacent and complementary product areas is compelling,” a report from the advisory group said.
“The transaction is expected to accelerate value creation for Amec Foster Wheeler shareholders.”
by Jillian Ambrose, The Telegraph