UPDATE: Credit Suisse Downgrades Foster Wheeler on Potential Deal with AMEC

In a report published Tuesday, Credit Suisse analyst Jamie Cook downgraded Foster Wheeler

to Neutral from Outperform following a potential deal with Amec, lowering its price target to $32.00 from $35.00. According to the report, the downgrade regards the potential sale to Amec for $32.40 per share (~$3.3B total value, including one-time dividend). While FWLT agreed not to solicit alternative proposals through Feb. 22, it is believed the modest premium and commentary from the Amec call implies FWLT has been on the block for some time. “We believe the deal makes sense strategically in that both business models are similar (largely cost-plus and front-end PMC capabilities) and both AMEC and FWLT's respective oil & gas businesses are complementary,” the report noted. “Furthermore, we have seen increasing M&A in the E&C space as companies are rushing to get bigger and look to play NA energy infrastructure spend. That being said, we do not believe FWLT dramatically improves AMEC's positioning in the US as both lack construction capabilities which could become a big constraint in the market and likely a source of competitive advantage. We also question FWLT's view on its competitive positioning in NA given their willingness to sell at these levels.” FWLT closed Monday at $31.13 with shares trading down at 1.05 percent.