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Foster Wheeler to Buy MDM Engineering

Zacks Equity Research

Foster Wheeler AG (FWLT) recently announced that its subsidiary will be acquiring South Africa-based mining company, MDM Engineering Group Ltd. for approximately $109 million.

Foster Wheeler’s indirect wholly-owned subsidiary has inked a merger implementation contract (:MIA) with MDM Engineering. According to the MIA, Foster Wheeler is entailed to acquire all the common shares and options issued by MDM Engineering after obtaining approval from the latter’s investors.

MDM Engineering is a process engineering and project management company that conducts feasibility studies for mineral and metal processing plants, along with providing core services including designing, construction and development of the same.   

This deal comes after Foster Wheeler’s recent announcement of its acquisition by AMEC plc on Feb 13. As per the agreement, AMEC will be acquiring all the issued and to-be-issued share capital of Foster Wheeler in the second half of this year for about $3.3 billion or $32.69 per share.

Foster Wheeler has been a market leader in the mid-stream and down-stream oil and gas industry, which gave it a competitive edge. However, the company was finding it difficult to meet the rising demand for capacity additions, especially in the mining industry in a number of developing countries.

While AMEC has expertise in the upstream exploration, MDM Engineering specializes in the mineral and metal industry. These two companies will aptly complement Foster Wheeler’s strengths to drive both the top and bottom lines. These companies will also aid Foster Wheeler’s long-term objective of expansion across diverse sectors like upstream, minerals and metals.

Foster Wheeler currently has a Zacks Rank #3 (Hold). Some better-ranked players in the engineering and heavy industry include VSE Corp. (VSEC), AECOM Technology Corp. (ACM) and Quanta Services, Inc. (PWR). All three stocks carry a Zacks Rank #2 (Buy).

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