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ABB Sells Lummus Global for $950 Million Sign Up to receive Daily News Alerts in your E-mail Inbox
Posted on Tuesday, August 28, 2007 5:15:00 PM |
As expected, ABB, a provider of power and automation technology, has sold its Lummus Global business division to Netherlands-based Chicago Bridge & Iron (CB&I) Co. The deal, valued at $950 million on a debt- and cash-free basis, is expected to close in the fourth quarter, pending regulatory and shareholder approvals.
ABB executives have said in recent earnings disclosures that the company would divest Lummus as it fine-tunes its focus on two core businesses — power and automation technology.
Lummus Global, which provides engineering, procurement, and construction (EPC) management services to the upstream and downstream oil and gas, petrochemical, and refining industries worldwide, is in a healthy state, with 2006 revenue of $988 million. However, it is just now freeing itself from asbestos claims that landed ABB in the middle of U.S.-based lawsuits. In the wake of those settlements ABB transferred various assets to a personal injury trust fund. All present and future settlements will draw from that fund, thereby indemnifying CB&I from damages.
ABB officials said the divested Lummus is completely free of the asbestos lawsuits. However, during the due diligence process to prepare the company for sale, "ABB discovered certain suspect payments in a number of countries," a company statement revealed.
"As a result, we've launched an investigation to see what's behind those issues," said Thomas Schmidt, a Zurich-based ABB spokesman, in an interview with Managing Automation. Company policy is strict and intolerant when it comes to breaking corporate governance rules, Schmidt said. Because the company is listed on the New York Stock Exchange, "we contacted American authorities, including the DOJ [Department of Justice] and SEC [Securities and Exchange Commission] and informed them that we found something that looked suspicious," he said. Following the investigation, ABB will take full responsibility for any fines or penalties resulting from the suspected misappropriation of funds.
CB&I was one of several parties interested in Lummus, Schmidt said, and has products that, when combined with Lummus, will provide a full range of services across the entire hydrocarbon value chain, from proprietary technology to engineering, procurement, fabrication, construction, and final commissioning.
"This is a compelling strategic opportunity which will enable CB&I to better respond to the growing demand for energy infrastructure around the world," said CB&I President and CEO Philip Asherman, in a statement. CB&I expects the acquisition to be accretive to 2008 earnings per share, he said.
ABB, meanwhile, has completed its divestiture strategy with the sale of Lummus, and is now looking to grow its core businesses.
"This was our final milestone when it comes to our portfolio. Over the last five years, we've focused the portfolio very much on the power and automation businesses," ABB's Schmidt said. Last quarter, orders grew 26%, he said. To continue that growth, ABB may make small additions to the product portfolio. "We are now looking for acquisitions, not to diversify the business, but to remain focused on automation and power technology," he said.
"We are enjoying a strong organic growth rate and we are in a comfortable position where we don't have to buy growth," Schmidt said.
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