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McDermott Announces Onshore-Offshore Deal

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By MarEx 2017-12-18 08:51:49

McDermott International has announced a deal with CB&I where the companies will combine in an all-stock transaction to create a fully vertically integrated onshore-offshore company. The new company will offer engineering, procurement, construction and installation (EPCI) services, and together, will have a presence across onshore and offshore, upstream, downstream and power markets.
     
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. 

The estimated enterprise value of the transaction is approximately $6 billion, based on the closing share price of McDermott on December 15, 2017. 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.

“Customers worldwide increasingly seek a single company that can offer end-to-end solutions,” said David Dickson, President and Chief Executive Officer of McDermott. “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.”

The companies say that they have complementary global portfolios 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 operations in the U.S., creating a balanced geographic portfolio with a strong position in high growth developing regions. 
     
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 billion and a backlog of approximately $14.5 billioni.

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.

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.