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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Investopedia: Shaw Group Still Looking For More Energy

Although the economy is slowly getting better, commitments to major engineering and construction projects are still scarce and erratic. Making matters worse for Shaw Group (NYSE:SHAW), there's still a great deal of uncertainty in the U.S. power space as it pertains to licensing new nuclear facilities, retrofitting old plants and building new fossil-fuel power stations. While Shaw Group does look like a potential value today, investors have to be willing to exercise patience to see that value come to light.

Mostly Good News for the Nuclear Business
While Japan's Fukushima disaster chilled the nuclear power market, Shaw is seeing respectable progress in this large business. SCANA (NYSE:SCG) and Southern Co. (NYSE:SO) have both gotten the go-ahead to move forward with nuclear plant projects, which de-risks a substantial part of Shaw's backlog. On the other hand, while there's still hope that Progress Energy (NYSE:PGN) (in the process of being acquired by Duke Energy (NYSE:DUK)) will get the go-ahead of a new facility in Florida, the company has been beset by a variety of problems with its nuclear plants.

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Investopedia: Shaw Has Value, But Needs A Spark

Value traps can drive investors to distraction; nothing is quite as frustrating as owning a quality company but seeing the market ignore its long-term virtues because of short-term challenges. Such could be said for Shaw Group (Nasdaq:SHAW). Although the construction of new nuclear plants looks like a non-starter, the company still has a key position in servicing existing plants, not to mention ongoing opportunities in markets like environmental remediation for utilities and more general industrial and manufacturing construction. The question for investors, though, is how much pain they can tolerate in the short run as capex spending seems to be stuck on pause.

A Decent Start to the Year  
Shaw gave some encouragement to its shareholders on Wednesday morning with its earnings release. Revenue fell 2% from the year-ago level, but was in line with analyst expectation. Although the company picked up some business in the Mideast and Latin America, Asia and Europe were notably weaker. Within the segments, not a lot changed - the company's large power business saw revenue fall about 2%, while plant service and environmental/infrastructure traded off above-average and below-average growth.

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Investopedia: Can EnergySolutions Power Up With Nuclear Energy?

Shakespeare may have thought that it was better to try and fail than to never try at all, but Wall Street is seldom so forgiving. While EnergySolutions (NYSE:ES) has a lot going for it as a very rare pure play on nuclear energy services, the company is going through a difficult adjustment. After trying to compete as a tier-1 player, the company looks to be retrenching, and near-term earnings performance is not looking robust. Nevertheless, patient investors may want to keep an eye on this name as there may be more power to the business than near-term results suggest. (For background reading, check out The Biggest Nuclear Operators In The United States.)

A Tough End to the Year 

Due in part to some accounting readjustments, the fourth quarter of this fiscal year was not very strong for EnergySolutions. Revenue was effectively flat, gross profit was down 15%, and EBITDA fell 6%. None of that is likely to impress analysts, even on an adjusted basis.

Looking around on a division basis does not really help the picture much. The company's international business, its largest component, was basically flat on a revenue basis, but operating income fell more than 20% on lower fees from a major contract. Elsewhere, the commercial services business saw revenue jump, but operating income swung to a loss anyway.

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