Analyst calls Shaw deal a shocker

Published Jul 30, 2012 at 3:00 pm (Updated Jul 30, 2012)

Analysts who follow The Shaw Group say the investment community has been taken aback by the announcement that the only local Fortune 500 company in Baton Rouge is being acquired by Houston-based Chicago Bridge & Iron Co., one of the world's largest energy construction companies.

"This came as a big surprise," says Brian Konigsberg, an analyst who tracks The Shaw Group for Vertical Research Partners. "This is much larger than anyone expected and expands [CB&I's] portfolio dramatically. This will make them one of the largest power contractors in the world."

The $3.04 billion deal, if approved by the SEC and shareholders later this year, will indeed create a massive company with some 50,000 employees worldwide. Shaw will continue as a business segment branded CB&I Shaw.

Shaw founder and CEO Jim Bernhard Jr . will retire after the deal closes in early 2013, and CB&I CEO Philip Asherman will lead the combined company. "We'll be diversified across the entire energy sector, enabling us to capitalize on all the growing global demand for energy," Asherman said on a conference call with analysts earlier today.

Analysts were not the only ones caught off guard by the announcement. No one in the local economic development community had any idea either.

But economic development officials are trying to put a positive spin on the deal. LED Secretary Stephen Moret says, "We think there is the potential for significant job growth in Louisiana as a result of the acquisition, particularly in engineering jobs in Baton Rouge and expanded modular fabrication activity in Lake Charles. We plan to explore a variety of growth opportunities with CB&I in the near future."

Meanwhile, BRAC CEO Adam Knapp says, "The Shaw Group has indicated they do not expect employment changes in Baton Rouge at this time and the company will operate as its own business segment through CB&I Shaw."

While economists say it's too early to say what the long-term economic impact of the deal will be on Baton Rouge, Konigsberg says there is reason to believe the new company will keep a sizable presence here.

"As far as the Shaw business, there is going to be limited disruption," he says. "Functions at the senior management level will be transitioned over to Texas, and they will take advantage of leveraging their existing IT and HR functions, et cetera; but I think it's going to be left fairly intact" because there is not a whole lot of overlap in what the two companies do. —Stephanie Riegel