Engineering company Chicago Bridge & Iron said that it has agreed to buy Shaw Group for about $3.04 billion in cash and stock to create one of the world's most complete engineering and construction company focused on the energy industry. Under the deal, Shaw shareholders will receive $41 in cash and CB&I stock worth about $5 for each of their Shaw shares. That represents a premium of 72% to Shaw's closing price last Friday.
Shaw, whose businesses range from restoration of contaminated land to construction of military housing, had seen its revenue decline for over two years before the trend turned around late last year. The company had said its power segment started to benefit from U.S. nuclear projects, though at a slower-than-expected rate. It anticipates contributions from those projects throughout the fiscal year.
CB&I, meanwhile, has posted stronger top-line results every quarter for more than a year as it has won contracts for large infrastructure projects. CB&I said it would use cash on the balance sheets of both companies, along with about $1.9 billion in debt, to finance the acquisition.
Commenting on the deal, CB&I CEO Philip K. Asherman said, "We will become fully diversified across the entire energy sector, from power generation to LNG, from refining to gas processing, from offshore to oil sands, and beyond." The new company will have about 50,000 employees and a near $30-billion backlog.
Earnings per share in the first year are expected to be double-digit accretive before transaction related costs. The acquisition is expected to close in early 2013.
Shaw Group (SHAW : NYSE : US$41.49), Net Change: 14.80, % Change: 55.43%, Volume: 37,534,666
Chicago Bridge & Iron (CBI : NYSE : US$34.77), Net Change: -5.93, % Change: -14.57%, Volume: 19,363,747