Drilling down

13 January 2014 By Quentin Webb

The UK engineer is set to buy U.S.-listed rival Foster Wheeler. The structure is solid: a slim 12.8 percent premium, decent cost cuts, and payment half in stock to keep debt down. Investors just need to be satisfied that a big push into downstream energy makes sense.

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Amec, the British engineering firm, reached a provisional deal to buy U.S.-listed rival Foster Wheeler for 1.9 billion pounds in cash and shares. Under the non-binding deal, Foster Wheeler shareholders will get the equivalent of $32 a share, with half in cash. They will end up owning 23 percent of the enlarged Amec.

On Nov. 27 the Times reported Amec was eyeing Foster Wheeler. However a source close to the matter told Reuters then that the two sides were not currently in talks. This deal represents a 12.8 percent premium to Foster Wheeler’s closing share price on Nov. 26.

Amec said it expects the deal to boost earnings per share by at least 10 percent within 12 months and to exceed the buyer’s cost of capital within two years. Amec expects annual cost synergies of at least $75 million, plus “significant” tax savings and the chance to grow revenue.

Shares in Amec stood 1.7 percent higher by 0904 GMT on Jan. 13 at 1,097 pence a shar

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