Jefferies analyst Mark Wilson isn’t convinced by John Wood Group PLC’s (LON:WG) takeover of Amec Foster Wheeler Plc (LON:AMFW), downgrading the oil services group to ‘underperform’.
Wilson, in a note, agrees with the gearing target put forward by Wood, but, reckons there’s a progressive dividend risk that existed with Amec’s prior merger with Foster-Wheeler.
Wood faces the same problems that Amec ran into after it acquired Foster-Wheeler, according to Wilson.
“The all-share recommended offer from Wood Group for Amec-Foster-Wheeler on 13 Mar 2017 is a relative positive outcome for AMFW shareholders (+15% premium) but WG's excellent strategic track record in M&A and balance sheet management will be sorely tested,” the analyst said.
The broker’s new target price of 650p is some 9% lower than the Wood’s current share price of 717p.