Energy services giant Wood Group said on Monday (13 March) it has agreed to a £2.2bn merger with sector peer Amec Foster Wheeler.

The two FTSE 250-listed companies, which have a combined market value of approximately £5bn, confirmed Amec Foster Wheeler had accepted the all-stock deal, which values the latter at £5.64 per share a 15.3% premium on the company's shares closing price on Friday.

Under the terms of the deal, Amec Foster Wheeler shareholders will receive 0.75 of new Wood Group share for each share held and will own approximately 44% of the share capital of the combined group.

Both Wood Group and Amec said it expects the deal to have a positive impact on earnings in the first full year following completion and to be "significantly accretive" once full run rate synergies are achieved.

The newly-formed company is also expected to allow both groups to save a combined £110m in costs.

Wood Group chairman Ian Marchant said the deal was a "transformational transaction" for the Aberdeen-based company, explaining the merger will create a global leader across a range of industrial sectors.

"The combination extends the scale and scope of our services, deepens our existing customer relationships, facilitates further development of our technology-enabled solutions and broadens our end market, geographic and customer exposure," he said.

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

Separately, Amec reported annual revenue in 2016 was 8% lower on a like-for-like basis to £5.4bn, as ongoing weakness in the oil and gas market offset a strong performance in its other divisions. Trading profits dipped from £374m to £318m, while the order book shrank from £6.2bn at the half year mark to £5.8bn. However, Amec added a number of contrast wins since the year-end have not yet been fully recorded.

The company also added it has made significant progress on its £100m overhead cost reduction programme in the fourth quarter which was offset by the challenging oil and gas market.

Last month, Wood Group reported a 30% fall in profits in the 2016 calendar year. The firm blamed the decline on a "very subdued" North Sea oil industry, tougher pricing environment and currency headwinds.

Profit before tax and exceptional items came in at $174.2m for the 12 months to 31 December, down from a profit of $249.2m in the same period a year earlier, while revenue fell 26% year-on-year to $2.3bn.