Aberdeen-based oil and gas services company Wood Group said it agreed to buy rival firm Amec Foster Wheeler for about £2.2 billion in an all-share “transformational” deal.

Wood Group’s biggest ever takeover will create a combined firm with a stock market value of about $6 billion, according to Bloomberg data, making it among the biggest oil services companies in Europe, ahead of Petrofac and of Saipem SpA.

Wood Group said the combined firm will be able to achieve cost synergies of at least £110 million a year on a recurring basis and that “significant additional revenue growth opportunities may be realised by the combined group…”

The Aberdeen firm estimated “that realisation of these synergies would give rise to one-off costs of approximately £190 million incurred in the first three years post completion” and said the deal “is expected to be earnings-accretive on an adjusted EPS basis for both Wood Group and Amec Foster Wheeler in the first full year following completion.”

Amec Foster Wheeler shareholders will receive 0.75 new Wood Group shares for each Amec Foster Wheeler share and will own 44% of the combined firm.

Wood Group said based on its closing share price of £7.52 on March 10, the terms of the deal represent £5.64 per Amec Foster Wheeler share, a 28.7% premium to the 30-day average and a 15.3% premium to the £4.89 Amec Foster Wheeler closing price on March 10.

Wood Group shares were trading up about 3% at 775p. Amec Foster Wheeler shares were trading up about 13% at 555p.

Wood Group chairman Ian Marchant said: “The combination represents a transformational transaction for Wood Group, which accelerates our strategy and creates a global leader in project, engineering and technical services delivery across a range of industrial sectors …

“The combination will create an asset-light, largely reimbursable business of greater scale and enhanced capability, diversified across the oil & gas, chemicals, renewables, environment & infrastructure and mining segments.

“By leveraging Amec Foster Wheeler’s and Wood Group’s combined asset life cycle services across project delivery, engineering, modifications, construction, operations, maintenance and consulting activities, the combined group will be able to better capitalise on growth opportunities across a broad cross section of energy and industrial end markets …”

Wood Group CEO Robin Watson and CFO David Kemp will continue as CEO and CFO of the combined firm and Wood Group chairman Ian Marchant will continue as chairman of the combined group.

Four members of the Amec Foster Wheeler board will join the board of the combined firm as non-executive directors with Roy Franklin joining as deputy chairman and senior independent director.

The deal is subject to clearances from competition authorities in Australia, Canada, Kazakhstan, Turkey, the UK and the US.