OREANDA-NEWS. British oil and gas engineering firm Amec has agreed to buy Swiss-based rival Foster Wheeler for 1.9 billion pounds (USD 3.13 billion), the first sizeable acquisition in the sector for three years.

Amec said the deal would increase its position and help more than double revenues in growing markets such as Latin America and the Middle East.

The firm, which provides services and equipment for the oil and gas, mining, nuclear and renewable energy sectors, said the acquisition would also add oil and gas transport and refining capabilities to its existing extraction facilities.

The deal, expected to complete in the second half of this year, will end a drought of major transactions in a sector where targets' high growth forecasts have fuelled shareholders' expectations of big takeover premiums, making it difficult for firms to agree on price.

Amec's 680 million pound approach for British peer Kentz was rejected by Kentz's board last August, who said the bid undervalued the firm.

Bankers said in December that the sector's last sizeable deal was Wood Group's takeover of PSN for just under USD 1 billion three years ago.

Larger European contractors, which have amassed large cash reserves thanks to years of rapid growth, are hungry for such acquisitions which they believe would help them to expand into new regions such as Africa and newer specialists such as liquefied natural gas (LNG) and shale.

Amec expects a 10 percent boost in earnings in the first 12 months after the acquisition, with returns on its investment to exceed the cost of capital in the second year.

It said the deal would also create annual cost savings of at least USD 75 million.

"The combination of our two businesses, Amec and Foster Wheeler, would be financially and strategically attractive," Chief Executive Samir Brikho said.

Foster Wheeler provides engineering services and power generator equipment to the LNG, oil and gas and petrochemical sectors. The deal values it at about 10 times enterprise value to earnings, compared to a sector average of 8.1 times.