Shares of engineering and construction giant Fluor (FLR 2.76%) rose nearly 10% at one point in the first hour of trading on Dec. 14. The big news really wasn't directly related to Fluor, however, as it was NuScale Power that had agreed to be bought by a blank check company. Here are the top-level details and why Fluor's stock jumped on the deal.
Essentially, NuScale Power is going public, using the special-purpose acquisition company (SPAC) route to avoid what would likely be a more time-consuming and complicated initial public offering (IPO). Spring Valley Acquisition (SV), which barely moved on the news, is the buyer, with the deal expected to close in the first half of 2022. The combined company, which will be called NuScale Power after the deal is consummated, is expected to have an enterprise value of $1.9 billion.
What does any of this have to do with Fluor? The engineering company is the majority owner of NuScale Power, having invested $600 million in the company over the past decade or so. The investment makes sense, given that NuScale is developing a new modular nuclear reactor that Fluor could end up building. The blank check transaction, meanwhile, is expected to result in more than $400 million in cash that can be used to fund NuScale's research and development efforts. That would reduce Fluor's need to keep putting money into the nuclear upstart. Fluor, meanwhile, will own roughly 60% of the newly public NuScale Power. So there's a reason investors are excited here, noting that the value of some blank check companies have risen sharply subsequent to their mergers. Thus, there's potential upside here, as well.
If you own Fluor and are happy with it, there's probably nothing worth doing at this point. It is, basically, the same company as before, only there's some additional upside potential thanks to its investment in NuScale. That said, it might be worth keeping an eye on this deal and the company that comes out of it, given that Fluor will be the majority owner of NuScale Power after it "goes public."