Creates a fully vertically integrated
onshore-offshore EPCI company with a broad service offering and
market leading technology portfolio
McDermott International, Inc. (NYSE:MDR) and CB&I (NYSE:CBI)
today announced that the companies have agreed to combine in an
all-stock transaction to create a premier fully vertically
integrated onshore-offshore company, with a broad engineering,
procurement, construction and installation (“EPCI”) service
offering and market leading technology portfolio.
Upon completion of the transaction, McDermott shareholders will
own approximately 53 percent of the combined company on a fully
diluted basis and CB&I shareholders will own approximately 47
percent. Under the terms of the business combination agreement
(“BCA”), CB&I shareholders will be entitled to receive 2.47221
shares of McDermott common stock for each share of CB&I common
stock owned (or 0.82407 shares if McDermott effects a planned
three-to-one reverse stock split prior to closing), subject to any
withholding taxes. The estimated enterprise value of the
transaction is approximately $6 billion, based on the closing share
price of McDermott on December 15, 2017.
“Customers worldwide increasingly seek a single company that can
offer end-to-end solutions, and the combination of McDermott and
CB&I responds to these evolving customer needs by creating a
leading vertically integrated company,” said David Dickson,
President and Chief Executive Officer of McDermott. “This
transaction combines two highly complementary businesses to create
a leading onshore-offshore EPCI company driven by technology and
innovation, with the scale and diversification to better capitalize
on global growth opportunities. McDermott has been on a three-year
journey that has transformed our company and created a model for
delivering sustainable and profitable growth that we believe will
unlock value in the near and long term. By applying McDermott’s
operational excellence across the combined portfolio, we will be a
best-in-class solutions provider driven by consistency in systems,
processes, execution and culture. We have great respect for the
CB&I team and look forward to working with them to realize
significant benefits for our combined shareholders, customers and
employees.”
“The combination with McDermott maximizes value for shareholders
and provides the opportunity to participate in significant upside
potential as we create a premier vertically integrated engineering,
procurement, fabrication, construction and installation provider
with significant scale, diversification and global presence,” said
Patrick K. Mullen, CB&I President and Chief Executive Officer.
“Together, we will have a broadened reach across the entire energy
industry that addresses evolving customer needs, along with a much
stronger and more flexible financial profile than CB&I would
independently, which will benefit all our stakeholders. This unique
opportunity to combine with McDermott was presented as we pursued
the sale of our Technology and former Engineered Products
businesses. Our Supervisory and Management Boards and our
management team reviewed multiple strategic options and we
ultimately decided this transaction is the best path forward and in
the best interest of CB&I, and its shareholders and other
stakeholders.”
Highly Compelling Strategic and Financial
Rationale
- Complementary global portfolio and an established
presence in high-growth markets. This combination will
unite McDermott’s established presence in the Middle East and Asia
with CB&I’s robust operations in the United States, creating a
balanced geographic portfolio with a strong position in high growth
developing regions. Further, the combination will create
significant opportunities to capture additional value from market
trends across the entire value chain. Together, McDermott and
CB&I will have a presence across onshore and offshore,
upstream, downstream and power markets, enhancing competitiveness
and enabling more consistent, predictable performance through
market cycles.
- Greater ability to respond to evolving customer
needs. The combined company will offer customers
engineered and constructed facility solutions and fabrication
services across the full lifecycle, executed to maximize asset
value. Customers will also benefit from enhanced exposure across
diverse end markets, including refining, petrochemicals, LNG and
power.
- Enhanced financial profile to support growth.
The combined company is expected to have a strong capital
structure. On a pro forma combined basis, McDermott and CB&I
would have combined revenues of approximately $10 billioni and a
backlog of approximately $14.5 billionii. The combined company is
expected to generate EBITDA growth and strong free cash flow,
enabling it to rapidly de-lever.
- Leverages CB&I’s strong technology
capabilities. By retaining CB&I’s Technology business,
with its 3,000 patents and patent application trademarks and more
than 100 licensed technologies, the combined company will be one of
the world’s largest providers of licensed process technologies.
McDermott and CB&I anticipate leveraging these capabilities
across their customer base to drive follow-on work.
- Cash accretive with opportunities for cost and revenue
synergies. The transaction is expected to be cash
accretive, excluding one-time costs, within the first year after
closing. It is also expected to generate annualized cost synergies
of $250 million in 2019. This is in addition to the $100 million
cost reduction program that CB&I expects to have fully
implemented by the end of 2017. The cost synergies are expected to
come from operations optimization, G&A savings, supply chain
optimization and other related cost savings. Further, McDermott and
CB&I expect that the transaction will lead to substantial
revenue synergies due to the enhanced capabilities of the combined
company.
- Common attributes focused on safety and customer
engagement. McDermott and CB&I’s combined experience
in delivering customer centric solutions and fixed price lump-sum
contracts will form the basis for the combined company to deliver a
consistent approach to executing projects for customers. Further,
their similar cultures will ensure safety remains the number one
priority and will help facilitate a seamless transition for
partners and employees worldwide.
Headquarters and Governance
Following completion of the transaction, the combined company
will be headquartered in the Houston area. David Dickson, current
President and Chief Executive Officer of McDermott, will be
President and Chief Executive Officer of the combined company, and
Stuart Spence, current Executive Vice President and Chief Financial
Officer of McDermott, will be Executive Vice President and Chief
Financial Officer of the combined company. Patrick Mullen,
President and Chief Executive Officer of CB&I, will remain with
the combined company for a transition period to ensure a seamless
integration. Operational leadership will include representatives
from both companies.
The Board of Directors will be comprised of 11 members,
including 10 independent directors and David Dickson. Five of the
independent directors will come from McDermott and five will come
from CB&I. Gary P. Luquette, Non-Executive Chair of the
McDermott Board, will serve as the combined company’s Non-Executive
Chairman.
Transaction Structure
The combination involves a series of transactions under Dutch
law resulting in the sale of CB&I’s entire business, as well as
an exchange offer by McDermott in which CB&I’s shareholders can
tender their shares. Both the sale and the exchange offer
will result in the same consideration for CB&I’s shareholders
(subject to tax consequences, including potential Dutch withholding
taxes in respect of shareholders that do not participate in the
exchange offer).
Financing, Completion and Approvals
The combined company has secured approximately $6 billion of
fully-committed financing, led by Barclays, Credit Agricole CIB and
Goldman Sachs & Co. LLC, and it is expected that permanently
funded debt financing in the form of term loans and unsecured bonds
will be put into place prior to closing.
The transaction has been approved by the Boards of both
companies and is expected to be completed in the second quarter of
2018. It remains subject to regulatory antitrust approvals,
approval by McDermott’s and CB&I’s shareholders and other
customary closing conditions.
CB&I Technology Business
The transaction includes CB&I’s Technology business and
former Engineered Products business, for which CB&I has
obtained from its lender group various amendments to its debt
covenants.
Advisors
Goldman Sachs & Co. LLC and Greenhill & Co., LLC are
serving as lead financial advisors to McDermott, and Barclays and
Credit Agricole CIB are also serving as financial advisors. Moelis
& Company LLC is advising McDermott on financing related to the
transaction. Baker Botts L.L.P. is serving as legal counsel to
McDermott and NautaDutilh N.V. is serving as legal counsel to
McDermott in the Netherlands.
Centerview Partners LLC is serving as the exclusive financial
advisor to CB&I. Wachtell, Lipton, Rosen & Katz is serving
as legal counsel to CB&I and De Brauw Blackstone Westbroek N.V.
is serving as legal counsel to CB&I in the Netherlands.
Conference Call/Webcast
McDermott and CB&I will host a joint conference call to
discuss the transaction today at 5:00 p.m. EST (4:00 p.m. CST).
Callers may dial (855) 539-0893 within the United States or +1
(412) 455-6012 from outside the United States and enter the
passcode 1684189. A replay of the conference call will be available
for seven days, by calling (855) 859-2056 within the United States
or +1 (404) 537-3406 from outside the United States and entering
the passcode 1684189. A live webcast of the conference call and an
accompanying presentation will also be available in the investor
relations sections of the McDermott and CB&I websites.
Additional information with respect to the transaction will be
posted in the investor relations sections of the McDermott and
CB&I websites.
About McDermott
McDermott is a leading provider of integrated engineering,
procurement, construction and installation (“EPCI”), front-end
engineering and design (“FEED”) and module fabrication services for
upstream field developments worldwide. McDermott delivers fixed and
floating production facilities, pipelines, installations and subsea
systems from concept to commissioning for complex Offshore and
Subsea oil and gas projects to help oil companies safely produce
and transport hydrocarbons. McDermott’s customers include national
and major energy companies. Operating in approximately 20 countries
across the world, McDermott’s locally focused and globally
integrated resources include approximately 12,000 employees, a
diversified fleet of specialty marine construction vessels,
fabrication facilities and engineering offices. McDermott is
renowned for its extensive knowledge and experience, technological
advancements, performance records, superior safety and commitment
to deliver. McDermott has served the energy industry since 1923,
and shares of its common stock are listed on the New York Stock
Exchange. As used in this press release, McDermott includes
McDermott International, Inc. and its subsidiaries and affiliates.
To learn more, visit our website at www.mcdermott.com.
About CB&I
CB&I (NYSE:CBI) is a leading provider of technology and
infrastructure for the energy industry. With more than 125 years of
experience, CB&I provides reliable solutions to our customers
around the world while maintaining a relentless focus on safety and
an uncompromising standard of quality. For more information, visit
www.CBI.com.
Forward-Looking Statements
McDermott and CB&I caution that statements in this press
release which are forward-looking, and provide other than
historical information, involve risks, contingencies and
uncertainties that may impact actual results of operations of
McDermott, CB&I and the combined company. These
forward-looking statements include, among other things, statements
about anticipated cost and revenue synergies, accretion,
best-in-class operations, opportunities to capture additional value
from market trends, maintenance of a consistent customer approach
to pricing, safety and transition issues, free cash flow, plans to
de-lever and permanent debt financing. Although we believe
that the expectations reflected in those forward-looking statements
are reasonable, we can give no assurance that those expectations
will prove to have been correct. Those statements are made by using
various underlying assumptions and are subject to numerous risks,
contingencies and uncertainties, including, among others: the
ability of McDermott and CB&I to obtain the regulatory and
shareholder approvals necessary to complete the anticipated
combination, on the anticipated timeline or at all; the risk that a
condition to the closing of the anticipated combination may not be
satisfied, on the anticipated timeline or at all or that the
anticipated combination may fail to close, including as the result
of any inability to obtain the financing for the combination; the
outcome of any legal proceedings, regulatory proceedings or
enforcement matters that may be instituted relating to the
anticipated combination; the costs incurred to consummate the
anticipated combination; the possibility that the expected
synergies from the anticipated combination will not be realized, or
will not be realized within the expected time period; difficulties
related to the integration of the two companies, the credit ratings
of the combined company following the anticipated combination;
disruption from the anticipated combination making it more
difficult to maintain relationships with customers, employees,
regulators or suppliers; the diversion of management time and
attention on the anticipated combination, adverse changes in the
markets in which McDermott and CB&I operate or credit markets,
the inability of McDermott or CB&I to execute on contracts in
backlog successfully, changes in project design or schedules, the
availability of qualified personnel, changes in the terms, scope or
timing of contracts, contract cancellations, change orders and
other modifications and actions by customers and other business
counterparties of McDermott and CB&I, changes in industry norms
and adverse outcomes in legal or other dispute resolution
proceedings. If one or more of these risks materialize, or if
underlying assumptions prove incorrect, actual results may vary
materially from those expected. You should not place undue
reliance on forward looking statements. For a more complete
discussion of these and other risk factors, please see each of
McDermott’s and CB&I’s annual and quarterly filings with the
Securities and Exchange Commission, including its annual report on
Form 10-K for the year ended December 31, 2016 and subsequent
quarterly reports on Form 10-Q. This press release reflects
the views of McDermott’s management and CB&I’s management as of
the date hereof. Except to the extent required by applicable
law, McDermott and CB&I undertake no obligation to update or
revise any forward-looking statement.
Additional Information and Where to Find It
This communication is for information purposes only and does not
constitute an offer to sell or the solicitation of an offer to buy
any securities or a solicitation of any proxy, vote or approval
with respect to the proposed transaction or otherwise, nor shall
there be any sale of securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such
jurisdiction. In connection with the proposed transactions,
McDermott International, Inc. (“McDermott”) intends to file a
Registration Statement on Form S-4 with the U.S. Securities and
Exchange Commission (the “SEC”), that will include (1) a joint
proxy statement of McDermott and Chicago Bridge & Iron Company
N.V. (“CB&I”), which also constitutes a prospectus of McDermott
and (2) an offering prospectus of McDermott Technology, B.V. to be
used in connection with McDermott Technology, B.V.’s offer to
acquire CB&I shares. After the registration statement is
declared effective by the SEC, McDermott and CB&I intend to
mail a definitive proxy statement/prospectus to shareholders of
McDermott and shareholders of CB&I, McDermott or McDermott
Technology, B.V. intends to file a Tender Offer Statement on
Schedule TO (the “Schedule TO”) with the SEC and soon thereafter
CB&I intends to file a Solicitation/Recommendation Statement on
Schedule 14D-9 (the “Schedule 14D-9”) with respect to the exchange
offer. The exchange offer for the outstanding common stock of
CB&I referred to in this document has not yet commenced. The
solicitation and offer to purchase shares of CB&I’s common
stock will only be made pursuant to the Schedule TO and related
offer to purchase. This material is not a substitute for the joint
proxy statement/prospectus, the Schedule TO, the Schedule 14D-9 or
the Registration Statement or for any other document that McDermott
or CB&I may file with the SEC and send to McDermott’s and/or
CB&I’s shareholders in connection with the proposed
transactions. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION OR
DECISION WITH RESPECT TO THE EXCHANGE OFFER, WE URGE INVESTORS OF
CB&I AND MCDERMOTT TO READ THE REGISTRATION STATEMENT, JOINT
PROXY STATEMENT/PROSPECTUS, SCHEDULE TO (INCLUDING AN OFFER TO
PURCHASE, RELATED LETTER OF TRANSMITTAL AND OTHER OFFER DOCUMENTS)
AND SCHEDULE 14D-9, AS EACH MAY BE AMENDED OR SUPPLEMENTED FROM
TIME TO TIME, AND OTHER RELEVANT DOCUMENTS FILED BY MCDERMOTT AND
CB&I WITH THE SEC CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT MCDERMOTT, CB&I
AND THE PROPOSED TRANSACTIONS.
Investors will be able to obtain free copies of the Registration
Statement, joint proxy statement/prospectus, Schedule TO and
Schedule 14D-9, as each may be amended from time to time, and other
relevant documents filed by McDermott and CB&I with the SEC
(when they become available) at http://www.sec.gov, the SEC’s
website, or free of charge from McDermott’s website
(http://www.mcdermott.com) under the tab, “Investors” and under the
heading “Financial Information” or by contacting McDermott’s
Investor Relations Department at (281) 870-5147. These documents
are also available free of charge from CB&I’s website
(http://www.cbi.com) under the tab “Investors” and under the
heading “SEC Filings” or by contacting CB&I’s Investor
Relations Department at (832) 513-1068.
Participants in Proxy Solicitation
McDermott, CB&I and their respective directors and certain
of their executive officers and employees may be deemed, under SEC
rules, to be participants in the solicitation of proxies from
McDermott’s and CB&I’s shareholders in connection with the
proposed transactions. Information regarding the officers and
directors of McDermott is included in its definitive proxy
statement for its 2017 annual meeting filed with SEC on March 24,
2017. Information regarding the officers and directors of CB&I
is included in its definitive proxy statement for its 2017 annual
meeting filed with the SEC on March 24, 2017. Additional
information regarding the persons who may be deemed participants
and their interests will be set forth in the Registration Statement
and joint proxy statement/prospectus and other materials when they
are filed with SEC in connection with the proposed transactions.
Free copies of these documents may be obtained as described in the
paragraphs above.
McDermott Contacts
Media
Adam Morgan Director, Global Communications +1 (281) 253-9005
amorgan@mcdermott.com
FinsburyKal Goldberg / Winnie Lerner / Chris
Ryall+1 (646) 805-2855
Investors
Ty Lawrence Vice President, Treasurer and Investor Relations +1
(281) 870-5147 tplawrence@mcdermott.com
CB&I Contacts
Media
Gentry BrannSenior Vice President, Global Communications and
Brand Management+1 (832) 513-1031Gentry.Brann@CBI.com
Joele Frank, Wilkinson Brimmer KatcherDan
Katcher / Ed Trissel / Leigh Parrish+1 (212) 355-4449
Investors
Scott Lamb Vice President, Investor Relations+1 (832)
513-1068Scott.Lamb@CBI.com
i Combined revenues are based on the last twelve months ended
September 30, 2017. Does not reflect any pro forma adjustments.
ii Combined backlogs as of September 30, 2017. Does not reflect
any pro forma adjustments. Backlog from CB&I continuing
operations and the Technology Operations segment included
approximately $900 million and $542 million related to equity
method joint ventures, respectively, as of September 30, 2017.
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