Chicago Bridge to use $1.9 billion of debt to fund Shaw acquisition

By Lisa Kerner

Charlotte, N.C., July 30 - Chicago Bridge & Iron Co. NV chief financial officer Ronald A. Ballschmiede said the company will use a "small amount" of equity and $1.9 billion of new debt to fund its acquisition of Shaw Group Inc. in a cash-and-stock deal valued at about $3 billion.

The level of cash on both companies' balance sheets will be key going forward and will be used in part to fund the deal, Ballschmiede said during a conference call on Monday announcing the proposed acquisition.

In addition to cash on the balance sheets, Chicago Bridge & Iron will use debt financing pursuant to commitments from Bank of America and Credit Agricole.

Chicago Bridge & Iron also plans to take advantage of a "pretty good debt market" and secure long-term private placement-type money "north of five years," Ballschmiede said. The company will know more specifics after it goes to market.

Ballschmiede expects Chicago Bridge & Iron to retain investment grade-type ratings once the acquisition is completed.

Combined, Chicago Bridge & Iron and Shaw are expected to have EBITDA of $800 million, which Ballschmiede believes will generate "a fair amount of opportunity" to get back into a comfortable position in terms of debt reduction.

Transaction details

Shaw shareholders will receive $41.00 in cash and $5.00 in Chicago Bridge & Iron equity (0.12883 shares based on an agreed upon recent average stock price of $38.81 per share) for each share of Shaw stock at closing.

The transaction is expected to close in the first quarter of 2013.

Both companies' boards of directors have approved the transaction.

Chicago Bridge & Iron plans to operate Shaw as a business sector under the brand name Chicago Bridge & Iron Shaw.

Chicago Bridge & Iron engineers and constructs large energy infrastructure projects. It is based in the Hague, and its worldwide administrative office is located in the Woodlands, Texas.

Shaw Group provides engineering, construction, technology, fabrication, remediation and support services for clients in the energy, chemicals, environmental, infrastructure and emergency response industries. The company is based in Baton Rouge, La.

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