Job losses and office closures are inevitable but Wood Group will keep its headquarters in Aberdeen following a £2.2billion takeover of energy services rival Amec Foster Wheeler (AMF), it was announced yesterday.
Wood Group chief executive Robin Watson gave the commitment to the Granite City after a joint statement revealed the two firms, employing 64,000 people between them, intend to merge.
But he also warned the scale of operations in Aberdeen, where the two companies have thousands of employees, would reflect reduced activity levels in the North Sea.
The all-share deal, expected to complete in the second half of 2017, is “unanimously recommended” by both boards but conditional on shareholder approval and clearances from competition authorities in Australia, Canada, Kazakhstan, Turkey and the UK.
It is the second multibillion pound mega-merger announcement involving listed Aberdeen firms this month.
The first saw Edinburgh-based insurance giant Standard Life swoop to buy fund manager Aberdeen Asset Management in an £11billion all-share deal.
Wood Group and AFW’s combination will create a new, larger global business out of two firms currently turning over more than £10billion annually.
Mr Watson said it was “inappropriate” to talk about how many jobs would go as Wood Group and AFW target efficiency savings of at least £110million a year.
“This is about growth and about the number of jobs that will be created (longer term),” he added.
Savings will be made through economies of scale and the “reduction of duplicate costs across board and executive leadership teams”.
Wood Group and AMF also highlighted a “consolidation of overlapping office locations, the elimination of duplicated IT systems and the reduction of duplicate costs across central support functions”.
Mr Watson declined to say which offices may shut as the companies strive to create a “stronger, more diversified platform better able to manage the inherent market and contract volatility that faces the oil and gas industry”.
But he added: “We have no plans to change our headquarters in Aberdeen”.
North Sea activity levels have taken a battering since the oil price slump, and Mr Watson said operational capability in Europe’s oil and gas capital would reflect the market.
“We are really excited about this announcement,” he said, adding: “We think it is a very significant milestone and an evolution of Wood Group”.
The “compelling, global proposition” was the kind of opportunity Wood Group had been seeking for the past year, he said.
He declined to say exactly how long the two firms had been negotiating a deal giving AMF shareholders 44% of the enlarged company.
Wood Group’s CEO also said the deal with engineering and project management firm AFW would further help to reduce the group’s reliance on oil and gas.
The proposals announced yesterday did not include a name for the enlarged group, and Mr Watson said this would be “part of our considerations in the early integration planning”.
Four members of the boardroom team at London-based AMF, including non-executive director Roy Franklin, would join the bigger company’s board.
Mr Watson said he did not want to speculate over the future of his opposite number at AMF, Jonathan Lewis, who has been in his post less than a year.