AMEC makes offer to buy Foster Wheeler

International engineering giant AMEC, based in the United Kingdom, but with approximately 6,500 employees and 60 offices across Canada, has announced a provisional agreement to buy Foster Wheeler AG.

Foster Wheeler is an international, Swiss-based engineering company described as a historic “rival” to AMEC in a Reuter’s news release. Both companies are heavily involved in the oil and gas, mining and energy sectors, as well as other areas like infrastructure and environmental services. AMEC has 29,000 people in 40 countries worldwide, and Foster Wheeler has 13,000 people in 30 countries.

The offer is subject to pre-conditions, including due diligence by both parties and debt financing arrangements by AMEC. Foster Wheeler has agreed not to solicit alternative proposals until 22 February this year. Once an agreement is reached, it will require shareholder and regulatory and anti-trust approvals. It’s anticipated that Foster Wheeler shareholders would hold shares in AMEC, representing approximately 23% of its enlarged share capital.

According to a press release issued by AMEC, combining with Foster Wheeler would add “a robust and profitable power equipment business with a solid backlog of orders,” and would position 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.”

The acquisition would also expand AMEC’s geographic footprint in growth regions, especially in Latin America.

The release said that the annual cost synergies of combining the companies are estimated to be at least $75 million.

AMEC Chief Executive Samir Brikho, said in the release: “The combination of our two businesses, AMEC and Foster Wheeler, would be financially and strategically attractive…. 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.”

On November 4 last year AMEC agreed to acquire Automated Engineering Services Corp, a 175-person, 20-year old nuclear services firm based in Naperville, Illinois.

AMEC’s forebears in Canada have a long history. Its roots here lie with the Montreal Engineering Company, which dates from the beginning of the 20th century. It was renamed Monenco and in 1992 it was acquired by AGRA and became AGRA Monenco, being one of Canada’s largest consulting engineering companies. Then in 2000, AGRA Monenco was acquired by the U.K. company AMEC. AMEC’s main offices in Canada are in Oakville, Vancouver, Toronto and Calgary, and it incorporates the AMEC Earth & Environmental division.