If I had to sum up 2017 for Chicago Bridge & Iron Company (NYSE: CBI) just one sentence, I would note how ironic it is that a company that helped build some of the largest structures in the U.S. over its 125-plus years of existence crumbled so much in just a year's time.
Shares of the construction and engineering company plunged 49.2% in 2017 as a trifecta of bad news hit investors: mounting losses, high leverage, and a dividend cut. Chicago Bridge hammered the last nail in the coffin in December by deciding to sell itself to McDermott International (NYSE:MDR) for no premium.
After struggling to grow its bottom line amid lower orders and writedowns on several projects, Chicago Bridge made desperate attempts last year to cut costs and deleverage its balance sheet. For that, the company not only put up a high-margin business like technology for sale, but also abruptly suspended its dividend. Investors, who were earning 1.7% a yield from the stock, sent the stock crashing 32% right after.
There was no respite in sight. Chicago Bridge's business was dwindling and losses were piling up. It won ordersworth only $437 million during the third quarter compared with $1.7 billion in Q3 2016. For the nine months ended Sept. 30, 2017, the company reported a net loss of $391 million compared with a profit of $352 million in the year-ago period.
As if losing the dividend wasn't enough, investors in Chicago Bridge received a final shock in December when the company announced a merger with McDermott International in a deal that would fetch CB&I shareholders no premium whatsoever.
While McDermott believes the combined company will be able to generate strong cash flows and pare down debt, Chicago Bridge's debt load and negative cash flow won't make it as easy as McDermott makes it sound. Chicago Bridge shareholders have been burned badly, and as my fellow Fool Rich Smith contends, there's little to be excited about in the combined entity, either.