The UK’s Office of Fair Trading (OFT) is looking into Scottish energy services giant Wood Group’s £606million acquisition of smaller rival PSN.
The OFT said yesterday it was a routine investigation due to the size of PSN and was expected to last around two to three months.
It wants to hear from anyone with competition or public-interest issues.
The OFT does not have the legal power to prohibit the deal but if, based on any evidence presented, it concludes that the takeover could lead to a substantial lessening of competition in UK markets, it has a legal duty to refer the case to the Competition Commission (CC).
During the OFT process, Wood would have the opportunity to offer its own solutions to solve any competition concerns identified by the OFT.
These remedies, if accepted by the OFT, could avoid a reference to the CC.
If the case does go to the CC, its in-depth investigation can last up to six months.
The CC has wide-ranging powers to remedy any competition concerns, including preventing a merger from going ahead. It can also require a company to sell off part of a business or take other steps to improve competition.
The OFT said that, as the investigation had just started, it was too early to make any comments or assumptions about the outcome.
Wood declined to comment yesterday.
The PSN deal, exclusively revealed by the Press and Journal on December 13, would create the world’s leading production services business. It is Wood’s largest acquisition to date and also the biggest takeover involving two Aberdeen companies.
Wood’s production facilities division is to merge with PSN, resulting in a unit employing more than 22,000 people worldwide.
The total workforce of the group will jump to around 38,000 when PSN’s 8,500 staff are added in. Nearly a third of PSN’s people work in Aberdeen or the North Sea, while Wood has more than 6,000 working in the Granite City or the North Sea and more than 300 in Glasgow.
Wood’s other businesses in engineering, well support and gas turbine services would be unaffected by the acquisition.
Wood said when the deal was announced that the acquisition was subject to relevant anti-trust approvals and completion was expected in the second quarter of 2011. Until then, both Wood and PSN would continue to operate as separate entities.
All the PSN bosses are staying on, with PSN chief executive Bob Keiller to hold the chief executive position in the enlarged Wood Group PSN division. His deputy will be Les Thomas, currently chief executive of Wood Group Production Facilities.
Allister Langlands, chief executive of Wood, said at the time of the deal announcement: “Wood Group PSN will have a larger footprint, deeper resources and capabilities and, by selecting best practices, be able to deliver additional added value to our customers.
“The combined business will be better positioned to help tackle current key industry issues, including operational assurance, competency, reliability and asset integrity.”