The UK's Competition and Markets Authority (CMA) has raised concerns over Wood Group's proposed £2.2bn ($2.7bn) takeover of energy services company Amec Foster Wheeler.
Following an initial investigation into the merger, the competition watchdog said that the take over could lead to competition concerns in the supply of engineering and construction (E&C) services and operation and maintenance (O&M) services on the UK continental shelf.
According to the CMA findings, the merger will bring down the number of major players in the engineering services to the UK’s upstream offshore oil and gas sector from 4 to 3.
It raised concerns that competition from other suppliers may not be enough to ease competition worries.
CMA Deputy Chief Economic Advisor Kate Collyer said: “We have consulted widely on the implications of this merger and it is clear that Wood Group and Amec Foster Wheeler have a particularly strong market position in the supply of key services to the Upstream Offshore oil and gas sector in the UK.
“The merger would, therefore, remove the rivalry between 2 of the 4 main suppliers of these services.”
At the beginning of the CMA’s initial investigation, Wood Group announced that it intends to submit proposals to resolve competition concerns arising out of the merger.
The watchdog has now set 9 August 2017 as the deadline for Aberdeen-based Wood Group to formalise its final remedies proposal.
CMA may refer the merger for an in-depth investigation if it finds the proposals offered by Wood Group do not properly address the competition concerns.
Collyer said: The CMA’s team will continue to work constructively with the Wood Group and Amec Foster Wheeler in the assessment of the remedies that they intend to formally offer to address these concerns.
“This merger will, however, warrant an in-depth investigation, unless the companies offer suitable proposals to address our concerns.”
In March, Wood Group signed an agreement to acquire UK-based rival Amec Foster Wheeler.
The combined company is expected to create an asset-light business of improved scale and capability, with a presence across the oil and gas, chemicals, renewables, environment & infrastructure and mining segments.
Image: Wood Group has until 9 August 2017 to formalise its final remedies proposal. Photo courtesy of © Crown copyright.