McDermott International Inc. and CB&I — two familiar names in south Louisiana — are merging in a $6 billion deal to create a Houston-based onshore-offshore company with broad engineering, procurement, construction and installation services.
Upon completion of the all-stock transaction, McDermott shareholders will own about 53 percent of the combined company and CB&I shareholders about 47 percent.
The impact on the Baton Rouge area and Louisiana is unclear. In July, CB&I completed a $755 million sale of its Capital Services business to New York-based Veritas Capital. The segment's services included maintenance, environmental engineering and remediation, engineering and construction services. The new company, which was dubbed Aptim, has about 1,500 employees locally.
CB&I, which bought the Baton Rouge-based Shaw Group in 2013, said it still had around 10,000 employees in Louisiana, with more than 2,000 of those in metro Baton Rouge. This includes workers at its office on Essen Lane and at pipeyards in Prairieville and Walker.
McDermott moved its corporate headquarters from New Orleans to Houston in 2005, before Hurricane Katrina struck. The company closed its last New Orleans office in late 2013.
The combined McDermott and CB&I operations will have revenues of about $10 billion and a backlog of work totaling about $14.5 billion. The transaction, which includes CB&I’s technology business and former engineered products business, is expected in second-quarter 2018.
The transaction combines two complementary businesses with the scale and diversification to better capitalize on global growth opportunities, said David Dickson, president and chief executive officer of McDermott. He will retain that title over the merged company.
The merger also is expected to generate annualized cost savings of $250 million in 2019, which is in addition to the $100 million cost reduction program that CB&I expects to have fully implemented by the end of this year.
In a conference call with analysts and investors, Dickson said he would not discuss the integration of businesses or any cuts that are coming.
“Customers worldwide increasingly seek a single company that can offer end-to-end solutions, and the combination of McDermott and CB&I responds to these evolving customer needs by creating a leading vertically integrated company,” Dickson said.
"This unique opportunity to combine with McDermott was presented as we pursued the sale of our technology and former engineered products businesses. Our supervisory and management boards and our management team reviewed multiple strategic options and we ultimately decided this transaction is the best path forward and in the best interest of CB&I, and its shareholders and other stakeholders,” said Patrick K. Mullen, CB&I president and CEO, who will remain with the combined company for a transition period.
“Together, we will have a broadened reach across the entire energy industry that addresses evolving customer needs, along with a much stronger and more flexible financial profile than CB&I would independently, which will benefit all our stakeholders," Mullen said.