Subsea 7 gatecrashes $6bn engineering merger
Offshore engineering group makes proposal for McDermott contigent on halting CB&I pact
A jolt of drama has struck the industry that provides engineering and construction services for the world’s energy sector.
Luxembourg’s Subsea 7 diclosed on Monday that it made a $2bn proposal for McDermott that is contigent on the US group dropping its planned tie-up with Chicago Bridge & Iron Company.
Subsea 7 said it proposed to buy all of McDermott’s capital stock for $7 per share, payable either entirely in cash or up to 50 per cent in Subsea 7 stock and the rest in cash. The price represents a 15.7 premium to McDermott’s closing level on Friday.
The proposal would give Houston-based McDermott an equity value of $2bn and an enterprise value of $2.15bn, according to Financial Times calculations based on FactSet data.
McDermott’s board rejected the proposal last Friday, Subsea 7 said.
“Given the attributes of the proposed transaction and our stated ability to further enhance our proposed terms, we encourage the McDermott board of directors to reconsider this compelling opportunity to combine two complementary businesses,” said Jean Cahuzac, Subsea 7 chief executive.
Subsea 7, which trades in Oslo, said it “will consider increasing its proposed price upon further assessment of McDermott’s business through discussions with McDermott management.”
“Additionally, for any stock consideration, Subsea 7 is open to discussing listing options for the shares of the combined company,” it added.
McDermott and Netherlands-headquarted CB&I had agreed in December 2017 a $6bn deal that will see shareholders of the former owning 53 per cent of the combined entity, with CB&I holders owning the rest.
The duo last month announced that it received approval from Russia’s anti-trust authrority for the merger, marking the final clearance needed from a competition perspective.
Institutional Shareholder Services, the influential proxy adviser company, last week advised shaeholders to vote for the deal, according to McDermott.
“Together, McDermott and CB&I will span the entire value chain from concept to commissioning to deliver compelling value, enhanced competitiveness and more consistent, predictable performance through market cycles,” said David Dickson, McDermott CEO upon announcing the ISS news.
Neither McDermott nor CB&I responded to a Financial Times enquiry regarding the Subsea 7 news.