Oilfield services company Wood Group has signed a $2.7bn contract to acquire Amec Foster Wheeler.

When complete, the agreement will combine two of the UK's leading energy services companies.

Following the deal, the acquisition will create a company with a combined value of around £5bn, reported BBC.

Wood Group expects to reduce £110m in costs from the combined entity. The merged entity will provide services to the oil and gas, chemicals and mining sectors.

The one-off cost for the transaction is expected to be around £190m.

Wood Group chairman Ian Marchant said: "The combination represents a transformational transaction for Wood Group, which accelerates our strategy and creates a global leader in project, engineering and technical services delivery across a range of industrial sectors.

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"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."

"The combination extends the scale and scope of our services."

Wood Group was established around three decades ago, with its base in Aberdeen, Scotland. It serves firms in the North Sea oil basin.

Amec’s clients include major oil companies such as BP, Shell and Exxon Mobil.

It was intending to announce £500m rights issue next week, but this plan has now been cancelled.

Investors of Amec Foster Wheeler will receive 0.75 new Wood Group shares for each share held. While investors will own 44% of the merged entity, Wood Group executives will have top positions.

The merged company will employ more than 64,000 people. The merger is expected to become effective in the second half of this year, subject to multiple closing conditions and approvals.

This deal is the latest mergers in the oil services sector. In October, 2016, General Electric Co agreed to merge its oil and gas segment with Baker Hughes.