Wood Group identifies £150m of cost-savings to come from Amec take-over

The Aberdeen-based oil-to-renewables Wood Group conglomerate has identified further cost-savings of £40 million which it expects to gain from its take-over of rival Amec Foster Wheeler.

When Wood announced its all-share offer last month, the company said the deal would generate ‘cost synergies’ through reduced overheads and removal of duplicate services of at least £110 million.

In an update statement to shareholders, Wood Group said: “As a result of further ongoing analysis of existing information and integration planning, we have been able to increase the expected level of pre-tax cost synergies from at least £110 million a year to at least £150 million per annum by the end of the third year following completion of the combination <with Amec>

“This is an increase of 36 per cent. compared with the anticipated synergies set out in the original announcement.”

The expected sources of cost-savings comprise:

Operating efficiencies: approximately 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: approximately 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 additionto other Corporate and Group functional costs,and: 

Administration efficiencies: approximately 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.

In addition, Amec Foster Wheeler’s support function activities, such as Finance and HR, will be merged with existing Wood Group systems.