CB&I third-quarter profit rises, eyes Shaw deal votes within weeks

Tue Oct 23, 2012 7:19pm EDT

(Reuters) - Chicago Bridge & Iron Co (CBI.N) reported a higher-than-expected quarterly profit as it aims to complete a takeover of Shaw Group Inc SHAW.N by early next year, with both sets of shareholders expected to vote on the deal within the next several weeks.

Shaw, which like CB&I is an energy-focused engineering company, had posted results on Friday along with a 2013 forecast below market estimates, while it faces down growing investor resistance over the proposed $3 billion deal.

CB&I said on Tuesday that shareholder votes would likely be held in late November or early December, depending on when the regulatory filing is done. They will be closely watched, with an investor opposing the deal saying it will take 'no' votes from only 13 percent to 17 percent of Shaw shareholders to stop it.

That is because holders of 75 percent of Shaw's shares must support the sale, excluding shares owned by any person holding more than 5 percent, according to Denali Investors LLC.

"The next major milestone will be the filing of the final proxy statement, which is in process now," CB&I Chief Executive Philip Asherman said on a conference call, adding that only a few remaining regulatory approvals were left to come.

Along with its third-quarter results, CB&I said its backlog of work declined to $9.5 billion at the end of the quarter from $10 billion three months before.

Net income rose to $80.2 million, or 82 cents per share, from $72.2 million, or 72 cents per share, a year before. Analysts had expected 81 cents per share, according to the average on Thomson Reuters I/B/E/S. Revenue grew 15 percent to $1.45 billion.

BIGGER BACKLOG BECKONS

Asherman sees significant growth opportunities, especially in U.S. petrochemicals and global liquefied natural gas, and believes Shaw will give it the scale to compete even better with larger rivals such as Fluor Corp (FLR.N) and KBR Inc (KBR.N).

Folding in Shaw's $17 billion of booked projects, CB&I would be second only to Fluor among U.S.-listed engineering companies in terms of the size of its backlog.

But Denali, calling CB&I's offer undervalued, has written to Shaw's independent directors to express concern that the chairman and chief executive, James Bernhard, seemed to want to close the deal early next year to allow him to run for the U.S. Senate or for governor of Louisiana, where Shaw is based.

Shaw has consistently responded to all shareholder concerns by reiterating that CB&I's $46-per-share offer represented a 72 percent premium to Shaw's closing price the previous trading day in late July.

Denali has also criticized Shaw for not discussing the deal or the process with investors, and then for not holding a conference call for its fiscal fourth-quarter results on Friday.

Shaw's only comment with the results on the deal was that it was still set to close in the first quarter of 2013. Later, Shaw acknowledged in its annual report that several "purported shareholders" have sued the company and its directors, alleging breaches of fiduciary duties in connection with the deal's approval.

"We believe that these lawsuits are without merit and intend to contest them vigorously," Shaw added.

Shaw shares are still more than $2 below the proposed buyout price as analysts wonder whether the deal will ultimately go through. CB&I's shares had closed 1.5 percent lower at $37.64 on Tuesday, prior to the release of its results.

(Reporting by Braden Reddall in San Francisco; Editing by Leslie Gevirtz, Leslie Adler and Bernard Orr)

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