CB&I to Buy Shaw for $3B

The Shaw Group (NYSE:SHAW) has agreed to be bought by CB&I (NYSE:CBI) in a cash and stock transaction valued at $3 billion, creating one of the world’s largest engineering and construction companies focused on the global energy industry.

Under the terms of the deal, CB&I, also known as Chicago Bridge & Iron, will pay $46 a share in cash and stock, about $41 in cash and $5 in CB&I equity, representing a premium of 72% over Shaw’s closing price on Friday.

CB&I plans to operate Shaw as a business sector under the brand name CB&I Shaw, where it will retain Shaw’s brand equity and allow the combined organization to recognize synergies and capitalize on both companies’ resources and capacity.

“This is a highly compelling transaction that will create significant value for our shareholders,” CB&I chief executive, Philip Asherman, said in a statement. “By adding (Shaw) into the CB&I family, we will become fully diversified across the entire energy sector.”

Shares of Netherlands-based CB&I slumped nearly 13% to $35.50 Monday morning, while Shaw’s climbed 60% to a new 52-week high of $42.56.

Both companies’ boards of directors have unanimously approved the deal. CB&I said it will fund the acquisition using cash on the balance sheets of both companies, along with debt financing.

The transaction remains subject to regulatory approvals, and the approval of both companies’ shareholders. If all goes as scheduled, the deal is slated to close in the first quarter of 2013.

Baton Rouge, La.-based Shaw recorded sales in 2011 of $5.9 billion. The company, which provides engineering and construction services to oil companies, said that following the acquisition’s close, CEO J.M. Bernhard will leave the company to pursue other interests.

Asherman will be CEO of the combined entity.

CB&I, which plans to expand in the nuclear, gas and coal power generation areas, said earnings will benefit from the transaction in 2013. CB&I’s clients include energy giants like Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM).

Bank of America Merrill Lynch (NYSE:BAC) acted as the financial advisor to CB&I, while Shaw was advised by Morgan Stanley (NYSE:MS).