You can either try this: Metaballs Proof of Concept - Work in Progress - Unreal Engine Forums
Or do what Epic did with Elemental Demo and use a morphing mesh.
As to the material if you want foamy look, you need a foam texture of some sort and then use it for some parallax effect, also generate a normal map out of it if you want more detail. And SSS for material type would be good i think.