Wood Group, Amec Foster Wheeler merger under scrutiny

Aug. 3 (UPI) -- Energy companies Wood Group and Amec Foster Wheeler said they've done enough to address competition issues after the British government expressed concern.

Wood Group announced plans in March to purchase AMEC Foster Wheeler for $2.6 billion in a move that will combine two of Britain's largest energy services companies. British regulator officials, however, said they had concerns because of the consolidation of engineering and maintenance services under one umbrella.

Amec Foster Wheeler said it already planned to sell of parts of its exploration and production business in anticipation of concerns from the British Competition and Markets Authority.

"Amec Foster Wheeler has made good progress marketing its British upstream oil and gas business to a range of potential buyers and is continuing the divestment process," CEO Jon Lewis said in a statement. "We remain committed to closing the transaction in quarter four this year."

Oil prices are about half what they were three years ago, constraining capital for exploration and production, the part of the energy sector serviced by companies like Wood Group and Amec Foster Wheeler. That's ushered in mergers in the upstream sector.

In March, U.S. energy company General Electric sold its water and processing unit to French water group Suez for $3.4 billion to in order to address competition concerns related to its acquisition of Baker Hughes.

The British regulator said wide-spread consultations about the merger plans for Wood Group and Amec Foster Wheeler led it to believe the tie-up would give the combined entity a "particularly strong market position" and remove the equivalent of at least two rival suppliers.

"Based on our initial investigation, this could significantly reduce customers' ability to obtain competitive bids, which could lead to increased prices and affect the competitiveness of the oil and gas industry in the United Kingdom," Kate Collyer, the economic advisor who made the decision for the regular, said in a statement.

The regulator said a more in-depth investigation is possible.