McDermott International plans to separate its operating subsidiaries, The Babcock & Wilcox Company (B&W) and J. Ray McDermott, S.A. (J. Ray), into two independent, publicly traded companies. The separation is anticipated to be effected through a spin-off of B&W, a transaction that is intended to be tax-free to McDermott shareholders. Following completion of the separation, McDermott intends to be renamed J. Ray McDermott, S.A., and shareholders will own 100 percent of two separate companies: B&W and J. Ray. The transaction is expected to be completed in nine to twelve months. The separation of B&W and J. Ray into two independent, publicly traded companies is expected to provide numerous benefits for McDermott shareholders, each company and its stakeholders. Selected benefits resulting from the transaction include:

Each company will be better positioned to accelerate growth based on its distinct corporate strategy, market opportunities, free cash flow and customer relationships;

More efficient allocation of capital, which would allow each company to develop an independent investment program without the constraints of a holding company structure;

Distinct publicly traded stock that could be used as currency for future acquisitions; Elimination of the risk posed by recent modifications in the rules under the Federal Acquisition Regulations ("FAR") that limit the U.S. Government's ability to contract with "inverted" companies and their subsidiaries; and Sharpened management focus and strategic vision, and closer alignment of incentives with shareholder value creation.

"The separation of B&W and J. Ray will be a transformational event for McDermott, which we expect to deliver important benefits to our shareholders, as well as the employees of each business," said John A. Fees, Chief Executive Officer of McDermott. "We believe that as separate, independent, publicly traded entities, B&W and J. Ray will benefit from enhanced management focus, more efficient capital allocation and greater operational and strategic flexibility. Given that McDermott has historically operated each business independently under the B&W and J. Ray franchises, including separate external credit facilities, we believe this should be viewed as a seamless transition for our customers and employees."

Mr. Fees continued, "Both B&W and J. Ray have made great strides in recent years. As the performance of each business has improved, the attractiveness of their respective prospects and the magnitude of their opportunities have become more evident. In light of recent changes in the rules under the FAR, our Board of Directors, together with its independent financial and legal advisors, engaged in a fresh, comprehensive review of the Company and its businesses, focusing on the best way for B&W to continue serving the U.S. Government's defense and nuclear operations objectives, while enhancing long-term value for McDermott's shareholders. We believe B&W and J. Ray are well-positioned to operate as well-capitalized, independent public companies and that the separation is the best way to achieve the objectives of our shareholders as well as the B&W and J. Ray businesses."

Tags: McDermott International