Engineering giant Amec has firmed up a £2bn deal to buy Foster Wheeler, consolidating its position in the oil and gas sector.
The UK-based firm, which employs 28,500 people in the energy, mining and infrastructure sectors, said the acquisition will double its revenues from growth regions outside its heartland of Europe and the Americas.
It is the first sizeable deal in the sector in years, and Amec chief executive Samir Brikho predicted it will prompt a phase of consolidation in the oil and gas sector saying: "Amec acquiring Foster Wheeler is going to be a start of something to happen in the industry."
The move is the latest attempt by Amec to bolster its scale, having recently failed with a £700m takeover approach for Kentz, which works on oil and gas services projects across the globe.
Until now, Amec's oil and gas business has been focused on the offshore upstream market, while Foster Wheeler, which has more than 13,000 staff in more than 30 countries, including in Aberdeen and its operational HQ at Reading, is focused on the onshore, mid and downstream markets.
Foster Wheeler was formed in 1927 from a merger of two companies based in the USA – the Power Specialty Company and the Wheeler Condenser & Engineering Company, whose roots go back to 1891.
The terms of the takeover offer were first disclosed in January but confirmed today following discussions between the two companies. Foster Wheeler shareholders will own 23 per cent of Amec following the cash and shares offer, which is still subject to their approval.
The agreement was announced at the same time as Amec posted a 3 per cent rise in underlying earnings to £343m for 2013, driven by good performances from its oil and gas businesses in the UK North Sea and the Middle East.
Shares rose 3 per cent as Amec hiked its dividend by 15 per cent on the back of a record order book of £4.1bn and expectations for good revenues growth this year.
But the engineering firm said it had been hit by weak prices and demand in Britain's power market, with its UK conventional power segment posting a loss before tax of £10m prompting a decision to discontinue this part of the business to focus on more complex sectors such as nuclear and renewable energy.
Almost half of Amec's staff are employed in the Americas, where the company generated 56 per cent of its revenues last year, with roles ranging from scientists and environmental consultants to engineers and project managers.
The combination with Foster Wheeler is expected to double its revenues from growth regions and significantly expand its presence in Latin America as well as leading to cost efficiencies of around $75m (£45.1m) a year, primarily from removing head office duplication and scaling back office functions.