North Sea jobs in most danger from Wood Group, AFW merger

North Sea operations of Wood Group and Amec Foster Wheeler (AFW) are the most at risk of job cuts after a £2.2billion mega-merger of the firms, it emerged yesterday.

Wood Group chief executive Robin Watson said there were more overlaps in UK upstream activities than anywhere else in the companies’ combined global business.

But he also insisted the long-term benefits to Wood Group and the Aberdeen economy more than offset any short-term pain.

Speaking after Wood Group shareholders met for the Aberdeen-based energy service firm’s annual general meeting, Mr Watson said he could not put a figure to the likely number of job losses in Aberdeen, or globally, after a takeover of AFW which is expected to complete later this year.

He added: “Genuinely, it is a question we can’t answer.”

But he did say there was overlap affecting about 25% of the two firm’s total current upstream business in the UK.

Job losses could potentially be mitigated by the UK’s Competition and Markets Authority insisting on “remedies”, perhaps including divestment, to maintain industry competitiveness, he suggested.

Spelling out the benefits of Wood Group and engineering and project management services company AFW getting together, Mr Watson said it would create a “leaner, better business moving forward”.

It can “accelerate the delivery of our strategy”, he said, adding: “We think, certainly in the medium-term – after some consolidation – this is a growth opportunity.”

Highlighting a broader range of end markets globally for the two firms after they become one, he said: “For a company based in Aberdeen, that is really important”.

Wood Group and AFW, currently employing 64,000 people between them, announced their tie-up plan in March.

The all-share deal is conditional on shareholder approval and clearances from competition authorities in Australia, Canada, Kazakhstan, Turkey and the UK. It will give existing AFW shareholders 44% of the enlarged company.

Mr Watson said the consolidation of property would contribute to annual cost savings of at least £150million by the end of the third year following completion.

He was unable to say which offices would shut but confirmed the new group’s headquarters would be in Aberdeen, at Wood Group’s HQ in Justice Mill Lane.

Mr Watson is poised to become chief executive of the enlarged company.

David Kemp and Ian Marchant, Wood Group chief financial officer and chairman respectively, are also expected to have equivalent roles.

As well as savings from a headcount reduction and property consolidation the two firms are expecting “cost synergies” through the elimination of duplicated IT systems and administration.

A trading update from Wood Group, which has added a net 1,800 people to its global workforce since the start of the year, highlighted continuing challenges and reduced activity levels in the North Sea. “Year-to-date performance has been weaker than anticipated,” the firm added.

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