Citi more cautious, cuts Wood Group, Amec Foster Wheeler valuation

Analysts at Citi reiterated their 'neutral' stance on shares of Wood Group and Amec Foster Wheeler, telling clients they continued to see the proposed tie-up as a "defensive" deal given the still "challenging" environment for oil and gas activity.

Indeed, to their more cautious outlook for key markets, mainly upstream oil and gas, and on the heels of the updated terms for the deal, they also lowered their joint-entity valuation on a discounted cash flow basis to 650p, which implied limited upside for the share price, notwithstanding recent falls.

Yes, the company resulting from the merger would be more diversified, but the transaction would also reduce its exposure to the recovery in US shale activity.

Deal success also rested heavily on the delivery of cost synergies, they said.