Shaw Group marks third major power merger development in a month

CB&I (NYSE: CBI) will purchase the Louisiana-based Shaw Group (NYSE:SHAW), a major energy sector vendor and builder of coal, natural gas and nuclear power plants, in a $3bn cash and stock transaction announced early July 30.

The proposed CBI-Shaw purchase comes on the heels of Duke Energy’s (NYSE:DUK) closure of its merger with Progress Energy. It also comes a week after NRG Energy (NYSE:NRG) announced plans to acquire GenOn (NYSE: GEN).

Under the terms of the definitive agreement, CB&I will acquire Shaw for $46 per share in cash and stock. Shaw’s shareholders will receive $41 in cash and $5 in CB&I equity – 0.12883 shares based on an agreed upon recent average stock price of $38.81 per share – for each share of Shaw stock at closing.

Directors of both companies have unanimously approved the deal. CB&I will finance the acquisition using cash on the balance sheets of both companies, along with debt financing under commitments from Bank of America and Credit Agricole. Closing of the transaction is subject to regulatory approvals, the approval of Shaw and CB&I shareholders and other conditions. The transaction currently is expected to close during 1Q 2013.

“While Shaw has been growing in our business and has many opportunities ahead of us, we believe this transaction is in the best interest of and creates significant value for our shareholders, our employees and our customers,” Shaw Group Chairman, President and CEO J.M. Bernhard Jr. said in a statement. Following the acquisition, Bernhard plans to pursue new business and public service interests.

CB&I banks on natural gas projects while Shaw is bigger in power industry

The combination of CB&I and Shaw will create one of the world’s largest engineering and construction companies focused on the global energy industry. Both companies said they believe this agreement will create value through a combined company with broader participation in a “robust” energy market.

Shaw has a long history in power plant engineering, procurement and construction along with maintenance and environmental retrofit projects – like building sulfur dioxide scrubbers for coal plants. Shaw also has a large footprint in government infrastructure contracts.

Shaw recently completed construction of the 585-MW Virginia City Hybrid coal-and-biomass power plant that Dominion Resources (NYSE:D) has developed in southwestern Virginia.

Shaw is also a lead vendor on the first two nuclear power plant projects to be approved by the U.S. Nuclear Regulatory Commission (NRC) in more than 30 years. Shaw is building the two new Vogtle reactors developed by a group led by Southern (NYSE:SO) subsidiary Georgia Power, as well as the two new V.C. Summer nuclear units being developed by SCANA (NYSE:SCG) subsidiary South Carolina Electric & Gas (SCE&G).

CB&I engineers and constructs some of the world’s largest energy infrastructure projects.  CB&I currently gets most of its income from outside the United States and from within the natural gas sector, said CB&I President and CEO, Philip K. Asherman, who will remain the top executive of the combined company.

CB&I is involved in the upstream and downstream natural gas sectors, and liquefied natural gas infrastructure. CB&I is also involved in the power industry by making repairs and modifications to nuclear reactor containment vessels. Additionally, the company makes equipment for the hydroelectric industry as well as the wind energy industry.

During a one-hour conference call on the merger, financial analysts peppered Asherman with questions about the nuclear power business, which some of the analysts characterized as risky. Asherman declined to elaborate much, but did say that CB&I isn’t a complete stranger to nuclear power by having had at least some involvement with dozens of nuclear reactors.

CB&I is looking forwarding to having a much larger footprint in the U.S. domestic electricity business, including nuclear, thanks to the Shaw purchase, Asherman said. CB&I Shaw will continue to be a major corporate citizen in Louisiana, where Shaw Group is based, Asherman said.

CB&I has a corporate headquarters in the Netherlands and a worldwide administrative office in The Woodlands, Texas.

 

 

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.