McDermott to divest storage tank, pipe fabrication businesses
McDermott announced it has completed a comprehensive strategic review of its portfolio as part of the integration process resulting from its combination with CB&I earlier this year, reaffirming its commitment to McDermott's core capabilities as a vertically integrated provider of technology-led onshore and offshore EPC/EPCI services. As a result of the review, McDermott has determined that its storage tank business and its U.S. pipe fabrication business are not core to the company's long-term strategic objectives as a vertically integrated supplier with strong pull-through from technology. In particular, McDermott has determined that these operations offer limited pull-through or cross-selling opportunities and, in some cases, their ability to pursue third-party work aggressively can be hampered by internal considerations. As a result, McDermott is developing plans to seek buyers for each of the two businesses. "These operations continue to perform well and offer competitive differentiation on a standalone basis in their respective markets, particularly global LNG and U.S. petrochemicals," said David Dickson, McDermott's President and Chief Executive Officer. "The tank business in particular is known as a world leader in its served markets. Our intent would be to seek the kinds of owners who would value the significant long-term growth potential of each business and who would thus provide attractive prospects for employees and customers." The two businesses, which McDermott expects to sell separately, had combined 2017 revenues of approximately $1.5 billion, 2017 backlog of approximately $1.4 billion and approximately 5,350 employees. McDermott anticipates proceeds in excess of $1 billion and is targeting completion of the transactions during 2019. It expects to use a majority of the proceeds to reduce the debt under its $2.25 billion term loan. McDermott will retain its fabrication yards that fit the company's vertically integrated model with their ability to deliver fully modularized and complete facilities for offshore and onshore projects, located in Altamira, Mexico; Batam Island, Indonesia; Jebel Ali, Dubai; Dammam, Saudi Arabia; and Qingdao, China.