Image copyright Amec Foster Wheeler

Amec Foster Wheeler has agreed to a £2.2bn takeover by Wood Group in a deal that brings together two of the UK's largest energy services companies.

Wood Group hopes to cut £110m in costs from the combined business, which will provide services to the oil and gas, chemicals and mining sectors.

The deal will create a company with a combined value of about £5bn.

Shares in Amec soared 14.7% to 561p, while Aberdeen-based Wood Group's shares climbed 4.4% to 785p.

Wood Group is offering 564p a share for its British rival.

Mark Wilson, an analyst at Jefferies, said: "While materially above our Amec valuation, we can see Wood Group consolidating its market-leading UK North Sea business, expanding product lines in the US and possibly increasing the scope for asset sales."

The deal has emerged at a difficult time for both businesses amid continued oil price volatility.

Amec was due to raise £500m through a rights issue next week, although this has now been suspended.

The funds were due to be used to reduce its £1bn debt pile and for a reorganisation of the company. It was formed by the merger of Amec and American firm Foster Wheeler three years ago.

Amec also announced on Monday that last year's revenues fell 8% to £5.4bn after "continuing weakness" in the oil and gas market offset strong performances elsewhere in its business. That weakness was also partly responsible for a £56m slide in profit to £318m.

In February, Wood Group revealed a revenues had fallen 16% last year to $4.9bn, while pre-tax profit halved to $66m.

The company has been shedding staff and last year it cut about 18% of its employees.

Under the terms of the deal, Amec shareholders will end up with 44% of the larger group.

The management of Wood Group - chief executive Robin Watson, finance chief David Kemp and chairman Ian Marchant - will continue in their roles following completion of the deal.

Wood Group chairman Ian Marchant said: "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.

"Delivering significant sustainable synergies will also result in a leaner and more competitive combined group, creating value for shareholders."