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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (54063)	6/18/2014 4:52:04 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78717

CBI: Well here's what I as a long see: Avg annual p/e beginning in '08: -45x, 11.3x, 16.2x, 14.9x, 15.1x, 19.7x current p/e: 14.9x forward p/e: 12.6x (based on lowest earnings estimate of the 17 analysts who Yahoo says follow the company) Yahoo shows p/sales ratio of .63. Except for 12/'08 and this year, the average annual p/sales ratio has not been below .81 in the past ten years. In the past five years, the reported roe has ranged from 21.2 to 24.5%. I see a relatively low p/e, relatively high reported roe, and a low p/sales. Until a couple of days ago, a non-controversial company with seemingly okay business prospects.

To: Jurgis Bekepuris who wrote (54063)	6/18/2014 5:44:52 PM
From: Asymmetric	Read Replies (1) \| Respond to of 78717

> CBI will get expertise in building nuclear power plants" is rather nebulous argument for going long.< Jurgis, the fault is mine that I poorly paraphrased CBI's business prospects and rationale for acquiring Shaw Group in the first place. This WSJ article on the merger between the two companies fleshes out what makes/made CBI attractive to me: Message 28303496 >> A $3 Billion Deal Forms New Power Plant Player Chicago Bridge to Buy Shaw in $3 Billion Deal Creating Giant Energy-Sector Builder By MATT DAY and SAABIRA CHAUDHURI Wall Street Journal Updated July 30, 2012, 5:30 p.m. ET Chicago Bridge & Iron Co. agreed to buy rival Shaw Group Inc. in a $3 billion deal that will create one of the world's biggest energy infrastructure companies. The combined company, to be called CB&I Shaw, will be involved in everything from building nuclear power plants in the U.S. and China to constructing gas-processing plants and oil storage tanks globally. It will have a $28 billion order backlog of projects in the oil, gas and electric industries, including about $18 billion coming from Louisiana-based Shaw, one of that state's largest and most politically influential firms. "We've got a great backlog in front of us," said Philip K. Asherman, chief executive of CB&I, which is headquartered in The Woodlands, Texas. Mr. Asherman described Shaw in a conference call as an attractive "bolt on" acquisition that will give CB&I, which is more focused on the oil-and-gas-business, better access to lucrative and potentially growing projects in the electric-power industry. Utilities in coming years are expected to spend billions of dollars building new power plants and retrofitting coal-burning plants to meet tougher antipollution regulations. The addition of Shaw also is expected to allow CB&I to reduce its revenue volatility, in part because Shaw gets more of its money from relatively stable and predictable work such as providing maintenance and retrofitting services to the power industry. Shaw supplies services to about 40% of the 104 nuclear reactors operating in the U.S. and many conventional power plants. It also has a profitable division that furnishes disaster-recovery services to the federal government, such as work it performed following Hurricane Katrina. Although a nuclear renaissance hasn't materialized as some had expected in the U.S., Shaw nevertheless is helping build four nuclear reactors in Georgia and South Carolina, for Southern Co. and Scana Corp. Shaw has had some hiccups getting those first-of-a-kind construction projects running smoothly, but has constructed a large facility in Lake Charles, La., where it is building equipment modules for those four reactors that are then hauled to the reactor sites for final assembly. Shaw is a political heavyweight in Washington, D.C., and Baton Rouge, La., dispensing hundreds of thousands of dollars in political donations over the years to candidates, parties and political action committees. It has received contracts from the Federal Emergency Management Agency and the U.S. Army Corps of Engineers. Under the terms of the agreement approved by both companies' directors, Shaw holders will receive $46 in cash and stock for each of their shares, a 72% premium over Friday's close. Shaw gained 55%, or $14.80, to $41.49, while CB&I fell 14% to $34.94, both in 4 p.m. New York Stock Exchange trading. CB&I was founded in 1889 in Chicago and pushed west, building tanks for the water storage that was needed by growing towns and expanding railroads. It soon branched into oil and refined product tanks as the oil and gas industry took off. Currently, about 80% of CB&I's revenues come from outside the U.S., but that will drop to about 50% with the addition of Shaw, which is more focused on the domestic market. CB&I has posted strong results for the past year, landing major infrastructure projects. Demand has been particularly strong for energy storage projects in Russia and construction of liquefied natural-gas facilities globally. Shaw experienced declining revenues for more than two years before it turned a corner late last year. Mr. Asherman said Shaw has been of interest to CB&I for a couple years and became more appealing after it sold its 20% stake in nuclear-plant designer Westinghouse Electric Co., last year, and its chemicals business in May. CB&I will use cash on hand at both companies and $1.9 billion in debt to finance the purchase. The acquisition is expected to close in early 2013.