Amec looks to swallow Kentz in £800m takeover

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Engineering group Amec could be poised to make an £800 million swoop on rival Kentz as the group seeks to grow its oil and gas division.

Amec, which provides services and equipment for the oil and gas, mining, nuclear and renewable energy sectors, is understood to have approached the firm over a potential deal last month.

Shares in Kentz closed up 2 per cent at 475.9p on Friday. A source said that any potential deal was likely to be significantly lower than the reported 700p a share figure.

German engineer and project manager M+W Group, part of the Austrian conglomerate Stumpf, is also reported to have shown an interest in the firm, as has Canadian rival SNC-Lavalin.

Amec, headed by chief executive Samir Brikho, said earlier this month that it was looking to make acquisitions in the oil and gas sector during the second half of the year – and that if no deals were forthcoming, it would consider returning more cash to shareholders, having completed a £400m share buyback programme in February.

Unveiling its half-year results on 8 August, which showed a 2 per cent rise in adjusted ­pre-tax profits to £154m, on ­revenues of £2 billion, the firm said: “The pipeline of acquisition opportunities remains strong. Depending on progress on acquisitions, additional cash returns to shareholders will be considered in the fourth quarter.”

Kentz, a FTSE 250 company with a market value of £561m, listed in 2008 and has grown rapidly into a diversified construction company with mining, oil and gas, and infrastructure projects all over the globe.

The firm began life in 1919 as an electrical contractor based in Tipperary, Ireland. It now has more than 14,500 employees in 30 countries and in March reported a 32 per cent jump in annual pre-tax profits to $104.8m (£67m), on revenues of almost $1.6bn.

Chief executive Christian Brown said last month that the group was looking for engineering acquisitions of its own.

Having “trawled the globe” looking for suitable companies, he said that he would be disappointed if a deal was not done this year, adding: “If that happened, it would not be out of lack of effort.”

Amec, which traces its roots back to 1848, sold its UK construction business in 2007 as it shifted its focus towards energy engineering, and has secured a string of contract awards in recent months.

The group, which employs more than 29,000 staff, won a two-year extension to its contract to provide gas producer BG Group with project management support in the North Sea. The deal, worth about £110m, runs until the end of 2015 and will also include engineering, procurement, construction and commissioning services for BG.

Amec also works with oil giant BP in the North Sea, and in April saw its deal to provide maintenance, operations and project support to the Forties pipeline system extended by two years, worth between £10m and £15m a year.

The bulk of its sales are generated in the Americas, which accounted for 57 per cent of total revenues during the first half, with more than a third of that coming from the oil and gas industry. Amec is also involved in the decommissioning of the Sellafield nuclear plant in Cumbria.

Kentz and Amec both declined to comment yesterday.

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