AMEC Offers To Buy Foster Wheeler For $3.2 Bln; Warns On FY14 Earnings View

(RTTNews) - Engineering and project management company Amec Plc (AMEC.L) Monday announced that it has provisionally agreed the terms for a recommended cash and share offer for Switzerland-based engineering and construction contractor Foster Wheeler AG (FWLT) with a value of approximately $3.2 billion or about 1.9 billion pounds. Regarding its trading update, Amec said its 2013 performance has been in line with expectations, but does not expect to meet earnings forecast for 2014.

Under the takeover offer, each Foster Wheeler shareholder would receive about 0.8998 new Amec shares and $16 in cash, together representing $32 per share. In addition, assuming binding terms are agreed, Foster Wheeler expects to pay a one-time dividend of $0.40 per share prior to closing.

Foster Wheeler said the offer price of $32.40 per share, taking into account the proposed dividend, represents a premium of approximately 12.8 percent to the company's closing stock price on November 26, the trading day prior to initial public reports about a potential business combination. It also represents a premium of approximately 19.4 percent to the 3-month volume weighted average price.

Amec said its Board believes the combination with Foster Wheeler businesses is a compelling proposition for its shareholders and would create sustainable value for the long term.

Amec added that the deal would result in double-digit earnings accretion in the first 12 months. As per the terms, Foster Wheeler has agreed not to solicit alternative proposals until February 22. The deal is projected to complete in the second half of 2014, subject to Amec shareholder approval and regulatory and anti-trust approvals. However, there is no certainty that a firm offer will be made or that the transaction will proceed, Amec said.

The company expects to finance the cash component of the possible offer of $1.595 billion or about 968 million pounds by a combination of its existing cash resources and new debt financing. Amec said it will seek a US listing in connection with the deal.

Once successful, the deal would result in Foster Wheeler shareholders holding about 23 percent of Amec's enlarged share capital. In addition, two non-executive directors of Foster Wheeler would join the Amec board.

Amec expects the proposed combination to more than double its current revenues in the Growth Regions, increasing its Latin America exposure. The company also projects annual cost synergies, estimated to be at least $75 million, and additional significant tax and revenue synergies.

Regarding its trading update, Amec said it has performed in line with its expectations for 2013 and the underlying business continues to perform as expected. However, the negative exchange rate forecast in 2014 would have an impact of approximately 10 million pounds of EBITA, a key earnings metric, year-on-year.

Amec said the benefits of the possible acquisition will not be fully realized in 2014 and that it does not now expect to report adjusted earnings per share of greater than 100 pence in the year.

In mid November, the company had said that it continues to expect to achieve earnings per share of greater than 100 pence in 2014.

Amec is scheduled to release its 2013 full year results on February 13.

In London, Amec shares are currently trading at 1,098 pence, up 19 pence or 1.76 percent. On Nasdaq, Foster Wheeler shares closed Friday's trading at $31.46, up $0.61 or 1.98 percent.