McDermott, CB&I to Merge into $6bn Business
US contractors McDermott and CB&I have agreed on a merger valued at $6bn, they announced late December 18. McDermott shareholders are to own 53% and CB&I shareholders the other 47% of the combined company, which is expected to have combined annual revenues of $10bn and with an order backlog of about $14.5bn. The merger is scheduled for completion in 2Q 2018, subject to antitrust approvals.
In a joint statement, the two companies said a merger would create a fully vertically integrated onshore-offshore engineering, procurement, construction and installation company with a broad service offering and market leading technology portfolio, with a global presence. Excluding one-off costs, they expect it to be cash accretive within the first year of closing, with annualised cost synergies of $250mn expected in 2019.
By retaining CB&I's technology business, with its 3,000 patents and patent application trademarks and more than 100 licensed technologies, the merged entity would be one of the world's largest providers of licensed process technologies.
CB&I has a long track-record of installing LNG facilities, including more than 40 LNG terminals in Turkey, UK, US, Puerto Rico and the Dominican Republic. It also built the Peru LNG export plant and is building two LNG liquefaction plants on the US Gulf Coast: Cameron LNG facility in Hackberry, Louisiana, and Freeport LNG facility in Freeport, Texas.
The merger would involve 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. Goldman Sachs, Greenhill, Barclays, Credit Agricole and Baker Botts are among those advising McDermott, while CB&I will be advised by Centerview Partners, Wachtell, Lipton, Rosen & Katz, and De Brauw Blackstone Westbroek.
Following completion, the combined company will be headquartered in the Houston area. McDermott’s CEO David Dickson and CFO Stuart Spence will retain their jobs in the enlarged company, while CB&I CEO Patrick Mullen will remain for a transition period. Gary Luquette, McDermott’s non-executive chair, will also stay in his job.