Engineering firm AMEC has provisionally agreed a takeover of rival Foster Wheeler in a $3.2 billion deal that would help the UK-based firm to grow its oil services business and global presence.

AMEC has proposed a cash and share offer for Foster Wheeler, the international engineering, construction and project management contractor and power equipment supplier. It describes the proposed takeover as "a compelling proposition" as it would improve AMEC’s geographic footprint in key growth markets and position it to serve the whole oil and gas chain.

The annual cost synergies of the proposed transaction would amount to at least $75 million annually, the London-based company said in a statement. AMEC said it would also benefit from Foster Wheeler’s 13 000-strong workforce as well as its "robust and profitable power equipment business with a solid backlog of orders".

AMEC employs over 29 000 people and has annual revenues of £4.2 billion. It is proposing to finance the cash component of the offer through new debt financing and existing cash resources.

Foster Wheeler’s Global Power Group specialises in the supply of steam generators and auxiliary equipment as well as in the design, construction and operation of power plants worldwide. The USA-based company operates in over 30 countries and is a leading contractor in the US shale gas sector.

AMEC Chief Executive Samir Brikho said: "The combination of our two businesses, AMEC and Foster Wheeler, would be financially and strategically attractive. As well as positioning us across the whole oil and gas value chain and providing scale in our growth regions, 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."