What happened

Shares of engineering and construction firm McDermott International (NYSE:MDR) are up 16.5% as of 10:45 a.m. EDT today. The move comes after McDermott's board rejected a buyout offer from fellow oil and gas engineering and construction firm Subsea 7 (NASDAQOTH:SUBCY).

So what

According to The Wall Street Journal, Subsea 7 approached McDermott's board last week with an offer that valued McDermott at $7 per share. It was willing to pay McDermott with 50% in Subsea 7 shares and 50% in cash provided that McDermott terminates its pending merger with Chicago Bridge & Iron (NYSE:CBI). Even though the board rejected the Subsea 7 offer, it shouldn't be too surprising that Wall Street bid up shares of McDermott to, you guessed it, $7 a share. 

Oil rig.

Image source: Getty Images.

Perhaps the reason Wall Street is most excited about the buyout offer is that it is contingent on walking away from the Chicago Bridge & Iron (CB&I) deal. That all-stock deal would involve taking on CB&I's sizable debt load. When the deal was announced late last year, McDermott's shares plummeted on the news

Now what

If the pending CB&I deal wasn't already enough of a wild card for the future of McDermott, an added takeover bid creates another layer of complexity that can make it hard for any individual investor to evaluate the merits of this company as a long-term investment. Subsea 7's management has said it would even be willing to up its offer if McDermott is willing to negotiate, but McDermott's board thought the deal "significantly undervalued McDermott and was not an attractive alternative to the proposed combination with CB&I."

While McDermott's management has already issued strong earnings guidance for 2018 and there are signs that spending on major capital projects in the oil and gas sector are on the upswing, this is one of those situations where it's probably best to sit on the sidelines until all this boardroom drama is resolved.