UK’s competition watchdog, the Competition and Markets Authority (CMA), is considering remedy proposals to overcome competition concerns regarding Wood Group’s buy of Amec Foster Wheeler.
Both companies provide engineering services to the UK’s upstream offshore oil and gas sector.
The review of Wood Group’s remedy proposal comes after the CMA recently determined that the acquisition of Amec Foster Wheeler by Wood Group gives rise 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.
In order to address the CMA’s competition concerns, the companies have offered to sell off almost all of Amec Foster Wheeler’s assets which contribute to these services in its upstream offshore oil and gas business in the UK.
The CMA said on Tuesday it considers there are reasonable grounds for believing that these undertakings, or a modified version of them, might be acceptable. As part of its process, the CMA will undertake a public consultation. If the CMA does not accept the undertakings proposed, the merger will be referred for an in-depth investigation.
Kate Collyer, Deputy Chief Economic Adviser and decision maker in this case, said: “It is crucial that competition is maintained in this major UK industry. We will consider the undertakings offered by Wood Group and Amec Foster Wheeler further, and carefully consult interested parties, in order to make sure that they fully address our concerns.”
The CMA has until October 12, 2017, to consider whether to accept the offer with the possibility of extending the deadline until December 7, 2017, in special circumstances.
Wood Group said that the CMA on Tuesday accepted in principle the remedy formally offered by Wood Group on August 9.
The remedy consists of the majority of Amec Foster Wheeler’s UK upstream oil and gas business located in the UK and serving UK customers (excluding its commissioning business, qedi).
According to Wood Group, the M&A process for the remedy is already at an advanced stage. Amec Foster Wheeler started a formal marketing process in May, which has attracted interest and is progressing well. The CMA in its provisional decision does not require the parties to complete the sale of the remedy business in advance of completing the combination. As a result, Wood Group and Amec Foster Wheeler continue to expect the combination to complete in the fourth quarter of 2017.
Commenting on the CMA’s announcement, Robin Watson, Chief Executive of Wood Group said: “Today’s announcement is an important milestone and gives us further confidence in our ability to complete the transaction in quarter four this year.”
Commenting on today’s announcement, Jon Lewis, Chief Executive Officer at Amec Foster Wheeler said: “We welcome the announcement by the CMA. Our offer of a proposed remedy in May and the early commencement of the sale process to potential buyers of the upstream oil and gas business has ensured we have navigated this process ahead of schedule increasing the likelihood that the transaction with Wood Group will close in quarter four this year.”