Oil services company Wood Group has signed an agreement to take over UK-based rival Amec Foster Wheeler for £2.2bn ($2.7bn).

Under the terms of the deal, the shareholders of Amec Foster Wheeler will receive 0.75 new Wood Group shares for each share held.

The Amec shareholders will own 44% of the merger group upon completion of the deal.

Wood Group said that the acquisition is part of its strategy to become a major player in project, engineering and technical services delivery across a range of industrial sectors. 

Wood Group chairman Ian Marchant said: "The Combination extends the scale and scope of our services, deepens our existing customer relationships, facilitates further development of our technology-enabled solutions and broadens our end market, geographic and customer exposure.

“Amec Foster Wheeler's shareholders will become shareholders in the Combined Group, thereby gaining from the enhanced operating capabilities, and benefiting from a share of the synergies, a stronger balance sheet and Wood Group's progressive dividend policy.”

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. 

Additionally, the combined group will leverage both the companies’ combined asset life cycle services to capitalize on growth opportunities in energy and industrial end markets.

Amec Foster Wheeler chairman John Connolly said: “The Amec Foster Wheeler Board believes that a combination with Wood Group adds to the standalone prospects of Amec Foster Wheeler, by accelerating the delivery of the future value inherent in the Amec Foster Wheeler business and, at the same time, helps to realise the full potential of each of Amec Foster Wheeler and Wood Group.”

Wood Group also expects the deal to result in significant growth opportunities and significant sustainable cost synergies of at least £110m.

Scheduled to be completed in the second half of 2017, the transaction is subject to satisfaction of certain conditions.

Image: Amec Foster Wheeler head office in London. Photo: courtesy of Basher Eyre/Wikipedia.