Wood finds an extra £40m reason to snap up Amec Foster Wheeler

Wood Group today said it had struck another gush of savings in its £2.2 billion takeover of struggling rival Amec Foster Wheeler.

The North Sea oil specialist had expected to snaffle cost savings of “at least” £110 million a year from the tie-up between it and rival oil servicing firm Amec, but now reckons those savings will be at least £150 million — 36% higher.

About half the savings will come from bigger buying power and economies of scale, with the rest coming from axing duplicate corporate costs and closing down overlapping office locations, IT systems and administration work.

Wood said there would, however, be a one-off cost of £190 million.

The deal came about as North Sea oil firms struggle amid weak crude prices that have seen oil and gas extractors cut costs.

Together Wood Group and Amec, which also works in the renewable energy field, are set to have combined revenues of more than $12.3 billion (£9.9 billion).

The banks billing Amec Foster Wheeler for their work on the deal are Goldman Sachs, Bank of America Merrill Lynch and Barclays.

Wood Group has hired JPMorgan Cazenove and Credit Suisse for advice.