McDermott Rejects Acquisition Offer From Subsea 7, Plans To Move Forward With CB&I Deal
McDermott’s board of directors rejected an unsolicited, nonbinding proposal received from Subsea 7 to acquire all of the outstanding shares of McDermott common stock for $7.00 per share, making this a roughly $2-billion offer. The proposal called for the termination of McDermott’s business combination agreement with Chicago Bridge and Iron Co. (CB&I), valued at approximately $6 billion.
The board concluded that the offer significantly undervalued McDermott and was not an attractive alternative to the proposed combination with CB&I. In a statement, McDermott said it is “fully committed to completing the transformational combination with CB&I.” If completed, the combination is expected to close in May.
Subsea 7 asserted that the proposal represents a premium of 16% to the latest closing share price of McDermott on 20 April 20 and a premium of 15% over the volume weighted average share price of McDermott over the previous 20 trading days. The company added that it would consider increasing its proposed price upon further assessment of McDermott's business through discussions with McDermott management. Jean Cahuzac, Subsea 7’s CEO, said, “…we encourage the McDermott board of directors to reconsider this compeling opportunity to combine two complementary businesses.”
Subsea 7 highlighted the advantages of its combination with McDermott:
Better positioning to execute offshore EPCI projects with conventional and deepwater expertise, experience, and assets
Greater opportunity to grow the companies' positions in markets with strong long-term growth prospects such as life of field services, renewables, and decommissioning
Gaining economies of scale and cost synergies
Maintaining a strong balance sheet with an investment grade profile, significant liquidity, and a strong order backlog
Subsea 7's proposed transaction would not be subject to any financing conditions or Subsea 7 shareholder approval. It would be subject to regulatory and other customary closing conditions.
McDermott today announced that following the closing of the combination with CB&I, the combined company intends to retain the name McDermott and will be led by McDermott President and CEO David Dickson.
“The name McDermott provides a strong foundation for the combined company and a platform on which we can build our future together,” said McDermott, who will continue to lead the combined company. “We are known today as a company that delivers excellence in project execution in a cost-efficient delivery structure for the global energy industry. Together, McDermott and CB&I will have the integrated technology, engineering expertise, unmatched experience and global reach to design and build the energy infrastructure of the future.”
CB&I’s business that provides proprietary process technology licenses, associated engineering services, catalysts, and engineered products will use the Lummus brand name. Lummus also offers process planning, project development services, and a comprehensive program of aftermarket support primarily for the petrochemical and refining industries. The Lummus business will be housed with McDermott’s digital twin software platform Gemini XDTM, under the umbrella of McDermott Technology. CB&I’s storage tank business will also keep its current branding.
Earlier this month Subsea 7 completed the acquisition of Siem Offshore Contractors and two vessels, making Siem a wholly owned subsidiary of the Subsea 7 Group.
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