July 30, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of engineering and construction company Shaw Group (NYSE: SHAW ) spiked 55% after larger rival Chicago Bridge & Iron (NYSE: CBI ) agreed to acquire it for about $3 billion in cash and stock.
So what: Under the deal, Shaw shareholders will receive $41 in cash and roughly $5 worth of CB&I stock for each share owned, representing a whopping 72% premium to Shaw's closing value on Friday. CB&I is betting big that Shaw's nuclear building services will position it for a possible nuclear resurgence, but judging from its own stock's double-digit decline, Wall Street doesn't seem thrilled with the price being paid to do it.
Now what: The combined company will have a global workforce of nearly 50,000 employees, backlog of more than $28 billion, and manufacturing facilities on all continents. "Shaw is a great company with tremendously talented employees," CB&I president and CEO Philip Asherman said in a statement. "By adding them into the CB&I family, we will become fully diversified across the entire energy sector, from Power Generation to LNG, from Refining to Gas Processing, from Offshore to Oil Sands, and beyond." So while Shaw shares are likely all popped out, today's plunge in CB&I might be worth looking into.
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