Thursday, August 02, 2012 1:32:56 AM
By Thomas Black and Julie Johnsson on July 30, 2012
Chicago Bridge & Iron Co. (CBI) (CBI) fell the most in almost a year after agreeing to buy Shaw Group Inc. (SHAW) (SHAW) for about $3 billion as the energy construction and engineering company expands its nuclear building services.
The shares tumbled 14 percent to $34.94 at the close in New York, the steepest drop since Aug. 8. Shaw’s 55 percent gain to $41.49 was still short of CB&I’s $46 cash-and-stock offer, 72 percent more than the July 27 closing price.
“This is a big change in strategy” for CB&I, Chase Jacobson, a William Blair & Co. analyst in New York, said in a telephone interview. He said CB&I, based in The Hague, had described its approach to acquisitions (CBI) as being focused on smaller targets, “not more than doubling or almost tripling the company’s backlog and diversifying the entire company.”
Buying Shaw will widen CB&I’s role in the building of the first new nuclear reactors approved in the U.S. since 1978. Long plagued by cost overruns, regulatory hurdles and environmental concerns, the industry was dealt a fresh setback when reactors at Japan’s Fukushima plant melted down after a 2011 earthquake.
CB&I’s offer consists of $41 in cash and 0.12883 share for each share of Baton Rouge, Louisiana-based Shaw. The equity portion had a value of $5 a share based on the “recent average price” of $38.81 for CB&I, according to a company statement that didn’t give the period on which that figure was based.
Deal Valuation
The deal values Shaw at about 26 times earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. The median paid in a survey of more than 40 similar engineering takeovers over the past decade was about 8.3 times Ebitda, the data show.
“It’s a pretty healthy price relative to trading values over the last couple of months,” Michael Dudas, a New York- based analyst at Sterne Agee & Leach Inc., said in a telephone interview. “I’m sure that’s something people are trying to get their arms around as well.”
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http://www.businessweek.com/news/2012-07-30/cb-and-i-to-buy-shaw-group-for-3-billion-in-cash-and-stock
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