A Merger Between McDermott International Inc. (NYSE:MDR) and CB&I Terminates A US Antitrust Hurdle


McDermott International Inc. (NYSE:MDR) and CB&I have agreed to merge, a transaction, which is approximated to be worth US$6 billion. The combination was announced in December 2017 and will lead to a termination of a significant antitrust hurdle by the U.S. Federal Trade Commission (FTC). The termination is under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 and it demands that for any combination to take place, there must be an elapse of the waiting period.

The HSR act amends the Clayton Act

There much more that is required by the FTC before the endorsement of any merger. Apart from halting the waiting period, the companies are required to file premerger notifications with the FTC. They must also report the arrangement at the Antitrust Division of the Justice Department for certain acquisitions.

As all this unfolds, there is a filing fee, which is more often than not divided between the FTC and the Antitrust Division. The two companies will now combine in an all-stock transaction and this will result in the creation of a fully vertically integrated onshore-offshore company. The McDermott stockholders will take home close to 53 percent of the combined company while the counterpart will own about 47 percent.

The combination is a plus to a stabilizing global oil market

The merger comes at a time when the global oil market has been taking a positive pathway to stabilization. The two companies have different strengths which are expected to meet the needs of the burgeoning market. For example, McDermott International deals with offshore drilling services while CBI is into engineering, procurement, and construction. It also specializes in those projects handling oil and gas industries.

David Dickson, the McDermott Chief Executive expressed optimism in the merger citing, “Customers worldwide increasingly seek a single company that can offer end-to-end solutions, and the combination of McDermott and CB&I responds to these evolving customer needs.”

All said and done the transaction is likely to conclude in the second quarter of 2018 subject to regulatory clearance in Russia and an approval from the shareholders of the two companies among other closing conditions.

Meanwhile, McDermott’s stock was trading at $8.72 an increase of $0.050 or 0.58%

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