Chicago Bridge & Iron to Acquire Shaw Group in $3 Billion Deal

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Researched by Industrial Info Resources (Sugar Land, Texas)--Chicago Bridge & Iron Company (NYSE:CBI) (CB&I) (The Woodlands, Texas) has entered into a definitive agreement to acquire The Shaw Group Incorporated (NYSE:SHAW) (Baton Rouge, Louisiana) in a cash and stock transaction valued at roughly $3 billion, according to Shaw. The deal was unanimously approved by the boards of directors for both companies, and is still subject to regulatory approvals, as well as approval from the shareholders of both companies. It is expected to close in the first quarter of 2013.

"We plan to create the most complete, energy-focused engineering services company in the world," said Philip K. Asherman, the president and chief executive officer of CB&I, in a conference call.

CB&I says the acquisition will allow them to diversify further with the addition Shaw's Plant Services, Fabrication & Manufacturing and Environmental & Infrastructure businesses. Earlier this year, Technip S.A. agreed to acquire Shaw's Energy and Chemicals business, which includes Shaw division Stone & Webster Incorporated's process technologies, as well as associated oil and gas engineering capabilities, for about $300 million in cash consideration.

Shaw will be given the new moniker CB&I Shaw and will operate as a CB&I business sector. The agreement will create one of the largest engineering and construction firms in the world, with an expanded role in the global energy industry. Upon completion of the deal, CB&I says it will have almost 50,000 employees worldwide and a backlog of more than $28 billion, with a stronger presence in the coal, natural gas, liquefied natural gas and nuclear power industries. Engineering and fabrication facilities will be located on six continents.

"This scale places us in a position where we'll be one of the largest Western companies in the business, and likely the largest company, in terms resources, targeted to the energy sector," Asherman said.

"Presently, nearly 80% of CB&I's revenue comes from outside the U.S., and more than 90% is directly tied to oil and gas," he later added. "Post-transaction, the geographic mix of our revenue is expected to be roughly 50:50, and we'll have a balanced, end-market mix across the entire energy sector, with additional diversification in the environmental and infrastructure sectors."

Industrial Info is tracking more than $104 billion in active projects worldwide involving Shaw, and more than $21 billion involving CB&I. Among the Shaw projects is $2.4 billion in additions at a coal-fired power station owned by Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina) in Cliffside, North Carolina. The project involves installing an 800-megawatt Toshiba steam turbine generator set, powered by an Alstom pulverized coal supercritical boiler, to provide base load power to the local grid. Among the CB&I projects is the $500 million construction of a natural gas processing plant owned by Dominion Resources Incorporated (NYSE:D) in New Martinsville, West Virginia. When completed, the plant will be capable of processing 200 million standard cubic feet per day of natural gas and will be able to fractionate 36,000 barrels per day of natural gas liquids extracted from the Marcellus and Utica Shale regions. The Shaw project is expected to be completed in August 2012, and the CB&I project by the end of the year.

Asherman said that CB&I expects to maintain an investment grade-type credit profile after the deal is completed.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.