Wood Group has estimated cost synergies of at least £150m (an increase of £40m) in relation to the recommended all-share offer for Amec Foster Wheeler by Wood Group announced on 13 March 2017.
As a result of further ongoing analysis of existing information and integration planning, Wood Group has been able to increase the expected level of pre-tax cost synergies from at least £110m per annum to at least £150m per annum by the end of the third year following completion of the Combination. This is an increase of 36 per cent. compared with the anticipated synergies set out in the Original Announcement.
In US$, the increase is equivalent to an increase from approximately US$134m to approx. US$183m, using the same dollar:sterling exchange rate of 1.2171:1 as set out in the Original Announcement.
The expected sources of quantified cost synergies, which are in addition to synergies previously targeted and already underway by Wood Group and Amec Foster Wheeler separately, comprise:
- operating efficiencies: approx. 50 per cent. of the identified cost synergies are expected to be generated from economies of scale in addressable operating cost, efficiencies in operational procurement spend and the reduction of duplicate costs across country and regional leadership;
- corporate efficiencies: approx. 20 per cent. of the identified cost synergies are expected to be generated from the reduction of duplicate costs across Board and executive leadership teams, in addition to other Corporate and Group functional costs; and
- administration efficiencies: approx. 30 per cent. of the identified cost synergies are expected to be generated from the consolidation of overlapping office locations, the elimination of duplicated IT systems and the reduction of duplicate costs across central support functions.
These anticipated synergies will accrue as a direct result of the Combination and would not be achieved on a standalone basis.
As further information and analysis becomes available, Wood Group is also confident of realising additional cost synergies that cannot be quantified for reporting at this time.
Wood Group estimates that realisation of these synergies would give rise to one-off costs of approx. £190 million (US$231 million) incurred in the first three years post-completion of the Combination. This is unchanged from the level identified at the time of the Original Announcement.
Aside from the one-off costs referred to above, the Wood Group Directors do not expect any material dis-synergies to arise in connection with the Combination.