Analysts at the investment bank have moved their recommendation up to ‘overweight’ from ‘neutral’ and increased their price target to 810p from 720p.
They expect the takeover of AMFW – which is set to close later this year – will create an “engineering blue chip” that has the potential to enter the FTSE 100 in the near future.
Wood is currently having to deal with a Serious Fraud Office investigation into Amec’s past, with allegations of possible bribery and corruption.
Even with that cloud hanging over it, JP Morgan believes the acquisition will prove to be beneficial for the company.
“The strategic rationale for the acquisition is clear: increased scale, broader capability and end-market diversification, enhanced by operational synergy capture,” wrote analyst James Thompson this morning.
“WG’s move away from offshore aligns with our Lost Decade thesis, with new markets offering superior growth (Renewables) and greater scale (Government & Infrastructure).”
He adds: “We believe shares can outperform OFS peers via: 1) delivery of base synergies targets, with further upside from incremental revenue & cost synergy capture; 2) balance sheet deleveraging, accelerated by ongoing sales processes; and 3) de-risking inherited liabilities, particularly the SFO investigation,” read this morning’s note.
Wood Group shares dropped 1.2%, or 9p, to 724.5p in mid-morning trade.