Investopedia: CB&I's Acquisition Of Shaw Is Shocking And Awesome

CB&I (NYSE:CBI) announced on July 30 that it will acquire Shaw Group (NYSE:SHAW) for $3 billion, or $46 per Shaw share. The deal will be made up of $41 per share in cash and $5 in stock (0.13 shares of CB&I), and values Shaw at a 72% premium to July 27's close. The deal price also carries a seven times multiple to the 2012 EBITDA multiple for Shaw - a slight premium to the broader sector.

To execute the deal, CB&I will need to raise about $1.9 billion in debt financing, but the company expects the deal to be accretive almost immediately.

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Investopedia: Regulation Likely To Always Weigh On Shaw

It's hard to maintain a lot of enthusiasm for engineering and construction (E&C) companies like Shaw Group (NYSE:SHAW). By their very nature, large projects take a long time to design, permit and execute, and there is enough competition in the industry to prevent anyone from making especially attractive economic returns for a long time. That said, I do not believe Shaw's valuation reflects the steps that the company has taken to reduce the risk of its operations, nor the long-term realities of electricity demand.

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Jacobs Still Looking To Build That Ladder

It is really no surprise that large engineering and construction companies are reporting uninspiring trailing growth these days. Refineries, highways, and manufacturing plants do not get built overnight and the panic that spread through the markets in 2008 held up a lot of contracts because of economic and funding concerns. The question for companies like Jacobs Engineering (NYSE:JEC), then, is how quickly business can get back to normal. 

A Sluggish End to a Tough Year
Jacobs ended its fiscal 2010 with something of a whimper. Revenue for the fourth quarter was down 8% on a year-over-year basis, while full-year revenue fell about 14% on a reported basis. That quarterly number was also about 8% shy of the average analyst guess, though, so there could be some risk of modest downward revisions (and all the attendant negative near-term momentum that can produce). 


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Steel Dynamcis - Buy The Muddle-Through?

Just how healthy is the economy, anyway? Retailers have been seeing shoppers return to their stores, and railroads continue to see carload volumes increase, but banks are still struggling and non-residential building is all but asleep. Even aluminum is no help - Alcoa (NYSE:AA) is doing better, but some of that is because of more rational Chinese producers and a recovery in aerospace. It is a very muddled picture, then, for Steel Dynamics (Nasdaq:STLD) as this large mini-mill operator moves into the final quarter of the year.

The Quarter That Was
Steel Dynamics had previously guided third-quarter numbers down, but nevertheless managed to deliver results on the upper side of that range. For a "tough" quarter, sales were surprisingly strong - Steel Dynamics reported 35% revenue growth over last year on 5% higher shipment volume. On the other hand, sequentially, Steel Dynamics saw revenue fall 3% on 4% higher shipments.

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