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Subsea 7 gatecrashes $6bn engineering merger

A jolt of drama has struck the industry that provides engineering and construction services for the world’s energy sector.
Luxembourg’s Subsea 7 disclosed on Monday that it made a $2bn proposal for McDermott that is contingent 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 percent 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.
Monday’s news sent shares in CB&I sinking 13 percent in pre-market trading in New York. McDermott rallied 19 percent, while Subsea 7 rose 2 percent.
McDermott’s board rejected the proposal last Friday. The group’s board “carefully reviewed and considered the proposal”, but ultimately concluded “that the proposal was not in the best interests of the company or its stockholders as it significantly undervalued McDermott and was not an attractive alternative to the proposed combination with CB&I,” McDermott said.

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