Worley to swallow AFW UK

WORLEYPARSONS is entering the North Sea by acquiring Amec Foster Wheeler’s UK business, fulfilling the conditions to placate competition regulators about AFW’s takeover by Wood Group.
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The move is part of the three "pillars" as part of WorleyParsons' strategic priorities going forward laid out in the full-year results, when it announced $33.5 million net profit after tax for the financial year, up from $23.5 million the year before.
Part of that has been consolidating its global footprint from 24,300 people across 118 offices in 42 countries at July 31, 2016 to 22,900 people in 106 offices across 42 countries, so the new acquisition means WorleyParsons sees the North Sea as a key priority area.
WorleyParsons announced this morning it's buying all of maintenance, modifications and operations provider AFW UK Oil & Gas for £182 million (A$303 million), which will boost the Australian company's earnings per share and cut its own net debt.
The deal will give WorleyParsons a nearly nine-fold lift in EBITDA before synergies are even accounted for, and boost its capabilities in the engineering and construction, operations and maintenance and hook-up services markets on the UK Continental Shelf in which AFW specialises.
AFW has maintainable revenues of about £350 million and maintainable EBITDA of £20 million a year, despite its current parent group's financial struggles which led to Wood Group targeting it for takeover.
The move will accelerate WorleyParsons' corporate strategy to build a world-class global MMO capability in the Integrated Solutions business line and adds execution capability and experience with mature systems and processes to support efficient execution of MMO orders.
 WorleyParsons' move comes as it sees increased spending ahead by clients - albeit still in what CEO Andrew Wood called "challenging" conditions - after the contractor's aggregated revenue dropped 23.6% last financial year as their spending contracted post-oil price crash.
The improvement in sentiment is evidenced in WorleyParsons' backlog rising to $5.1 billion at June 30, up from $4.2 billion a year prior with 86 significant awards worth more than $2.6 billion awarded over that time.
Andrew Wood said AFW UK was an attractive buy for WorleyParsons, which would enable the Australian company to enter the UK North Sea market as a leading player based in Aberdeen.
He said the move would create a global MMO business to drive medium-term growth for WorleyParsons, which will fund the deal through a 1-for-10 pro-rata, accelerated non-renounceable entitlement offer of about $322 million and existing debt facilities.
Investors Dar Group and John Grill have committed to participate in the entitlement offer to fund the deal, which is expected to close by the end of this month, suggesting there are no local competition issues to worry about.