McDermott offloading storage business arm for $475 million six years after merger

U.S. offshore engineering and construction player McDermott has set the sale of its storage business line in motion, with a newly inked agreement, following a marketing process that culminated in a winning offer from a consortium of financial investors, led by Mason Capital Management. The U.S. giant will use the cash from this divestment to settle debts.

After receiving multiple bids from potential buyers, McDermott has agreed to sell its CB&I storage business – engaging in the design and construction of storage facilities, tanks, and terminals – for $475 million of proceeds before taxes and transaction expenses. This divestment is expected to be completed in the fourth quarter.

Michael McKelvy, President and Chief Executive Officer of McDermott, commented: “The significant interest expressed in our storage business is a direct reflection of its long history of providing customers world-class storage solutions and its bright future. We believe this is the best transaction for our business, CB&I, its customers and employees.”

Based on the U.S. giant’s credit agreement, proceeds from the sale will be used to repay CB&I’s existing term loan, cash collateralize certain McDermott letters of credit, and reduce its existing term loan. CB&I became part of McDermott in 2018 when the actions to strengthen the storage business, included providing a dedicated capital structure.

Mike Martino, Managing Member and Principal of Mason, remarked: “We are pleased to reach this agreement to acquire and serve as the future stewards of CB&I. We believe the company has significant potential as a standalone enterprise, and we look forward to leveraging our experience successfully investing in industrial and engineering-focused businesses to improve the company’s operations and support profitable, long-term growth.”

With Goldman Sachs serving as the exclusive financial advisor for the transaction to McDermott, Kirkland & Ellis are acting as the firm’s legal counsel. On the other hand, Citi is acting as an exclusive financial advisor to Maso with Cadwalader, Wickersham & Taft serving as legal counsel.

“We look forward to the next chapter in our 130-year history,” said Mark Butts, Senior Vice President of CB&I, and added: “The consortium represents a diverse group of shareholders who are familiar with our business and have long believed in and supported our strategy.”

CB&I and Hanwha Ocean recently received approval in principle (AiP) for the design of a cargo containment system and an 80,000 cbm liquid hydrogen (LH2) carrier from DNV. McDermott has also tucked several new assignments under its belt, including an engineering, procurement, construction, and installation (EPCI) contract for pipelines and cables destined for QatarEnergy’s expansion of Qatar’s giant gas project.

The U.S. player also recently confirmed that it is a member of a consortium that won a front-end engineering design (FEED) contract for a proposed liquefied natural gas (LNG) project in the deepwater Area 4 block off the coast of Mozambique.