CMA raises competition concerns over Wood Group/Amec deal

The Competition and Markets Authority said on Wednesday that the proposed £2.2bn merger between Wood Group and Amec Foster Wheeler could lead to competition concerns in the supply of engineering and construction services and operation and maintenance services on the UK continental shelf.

“This is because the companies currently compete closely with each other, and are two of the main suppliers of these services; the merger will reduce the number of major players currently active in these markets from four to three; there are concerns that competition from other suppliers may not be sufficient to mitigate competition worries; and other suppliers seeking to enter the market or expand their UK presence may face significant barriers to doing so.”

Wood Group has already proposed to sell Amec’s North Sea business and the CMA said it had worked constructively with the parties to find an agreement. Wood Group now has until 9 August to formalise its final remedies proposal. If it does not formally submit a remedies proposal, or if the remedies offered do not sufficiently address the regulator’s competition concerns, the merger will be referred for an in-depth ‘phase 2’ investigation.

Wood Group chief executive Robin Watson said: “Both sets of shareholders overwhelmingly supported the proposed combination and we continue to believe that the proposed remedy will be sufficient to obtain clearance from the CMA. We remain fully committed to completing the transaction in quarter four this year.”

Meanwhile, Amec’s chief executive Jon Lewis said: “Since the announcement of the remedy offer in May, Amec Foster Wheeler has made good progress marketing its UK upstream oil and gas business to a range of potential buyers and is continuing the divestment process. We remain committed to closing the transaction in quarter four this year.”

At 1250 BST, Wood Group shares were down 1.3% to 613p. while Amec shares were off 0.2% to 447.70p.