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Item 1.01
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Entry into a Material Definitive Agreement.
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On December 18, 2017, McDermott
International, Inc., a corporation incorporated under the laws of the Republic of Panama (the “Company” or “McDermott”), entered into a Business Combination Agreement (the “Agreement”) by and among the Company,
McDermott Technology, B.V., a company incorporated under the laws of the Netherlands (“Bidco”) and a direct, wholly owned subsidiary of the Company, McDermott Technology (Americas), LLC, a Delaware limited liability company and a wholly
owned subsidiary of the Company (“U.S. Acquiror 1”), McDermott Technology (US), LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“U.S. Acquiror 2”), Chicago Bridge & Iron
Company N.V., a public company with limited liability incorporated under the laws of the Netherlands (“CB&I”), Comet I B.V., a company incorporated under the laws of the Netherlands and a direct, wholly owned subsidiary of CB&I
(“Comet Newco”), Comet II B.V., a company incorporated under the laws of the Netherlands and a direct, wholly owned subsidiary of Comet Newco (“Comet Newco Sub”), and several other indirect subsidiaries of CB&I identified and
defined in the Agreement as “CT Seller 1,” “CT Seller 2,” “CT Seller 3” and “CT Seller 4” (together, the “CT Sellers”; and the CT Sellers, together with CB&I, Comet Newco and
Comet Newco Sub, the “CB&I Parties”). The Agreement has been approved by the board of directors of the Company, the management board of CB&I and the supervisory board of CB&I (the “CB&I Supervisory Board”).
Structure.
Pursuant to the Agreement, the Company and CB&I will combine through a series of transactions, as follows (and subject
to the terms and conditions of the Agreement):
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Bidco will commence an exchange offer (the “Exchange Offer”) to acquire any and all of the issued and outstanding shares of the common stock of CB&I, par value €0.01 per share (“CB&I Common
Stock”), with each share of CB&I Common Stock accepted by Bidco in the Exchange Offer to be exchanged for the right to receive 2.47221 shares of common stock of the Company, par value $1.00 per share (“McDermott Common Stock”) (or
0.82407 shares of McDermott Common Stock, if the
3-to-1
reverse stock split of McDermott Common Stock contemplated by the Agreement is completed) (the applicable ratio,
the “Exchange Offer Ratio”), plus cash in lieu of any fractional shares (collectively, the “Per Share Consideration”);
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Subsidiaries of the Company will acquire for cash certain entities that own CB&I’s technology business (the “CB&I Technology Acquisition”) and the cash proceeds paid in the CB&I Technology
Acquisition will be used to repay certain existing debt of CB&I;
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CB&I will merge with and into Comet Newco Sub, and each share of CB&I Common Stock that was not tendered in the Exchange Offer will be exchanged into a share of Comet Newco stock (the “Merger”);
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Comet Newco will sell to Bidco all of the outstanding shares of Comet Newco Sub (the “Share Sale”) in exchange for a note that is mandatorily exchangeable into shares of McDermott Common Stock (the
“Exchangeable Note”); and
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Comet Newco will be dissolved and subsequently liquidate in accordance with Sections 2:19 and 2:23b of the Dutch
Civil Code. Pursuant to the liquidation, each holder of shares of CB&I Common Stock not tendered in the Exchange Offer will receive, as a liquidation distribution, the Per Share Consideration for each such share (reduced by applicable
withholding taxes, including any Dutch withholding taxes under the Dividend
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Withholding Tax Act 1965). Any portion of the Exchangeable Note that is distributed to Bidco will be extinguished. This step is referred to as the “Liquidation” and, together with the
CB&I Technology Acquisition, the Merger, the Share Sale and the Exchange Offer, the “Combination.”
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Each
step of the Combination is intended to be completed substantially concurrently, in the order indicated.
Treatment of Equity
Awards.
At the closing, outstanding CB&I restricted stock units that vest upon the closing in accordance with their terms, CB&I restricted stock units held by CB&I’s
non-employee
directors
and CB&I deferred share awards will vest (if unvested) and be converted into the right to receive the Per Share Consideration in respect of each share of CB&I Common Stock covered by the award, less any applicable withholding taxes. Also at
the closing, outstanding CB&I restricted stock units that do not vest at the closing by their terms and outstanding CB&I options will convert into corresponding awards relating to shares of McDermott Common Stock, with appropriate
adjustments to reflect the Exchange Offer Ratio and will remain subject to their original vesting schedule (except that any CB&I options will vest at the closing). Further, at the closing, outstanding CB&I performance shares will be
cancelled and converted into a right to receive a cash payment equal to (i) the target number of shares of CB&I Common Stock underlying the award multiplied by (ii) the Exchange Offer Ratio multiplied by (iii) the closing price of
a share of McDermott Common Stock on the business day immediately preceding the closing date.
Post-closing Governance.
At the
closing, the Company’s board of directors will have 11 members, including (i) six persons who are current members of the Company’s board of directors, two of which will be Gary Luquette, the Chairman of the Company’s board of
directors, and David Dickson, the President and Chief Executive Officer of the Company, and (ii) five persons who are current members of the CB&I Supervisory Board. Gary Luquette will continue as the
Non-Executive
Chair of the Company’s board of directors, David Dickson will continue as the President and Chief Executive Officer of the Company and Stuart Spence will continue as the Executive Vice
President and Chief Financial Officer of the Company. Patrick Mullen, President and Chief Executive Officer of CB&I, will remain with the combined company for a transition period to ensure a smooth integration. Operational leadership will
include representatives from both CB&I and McDermott.
Closing Conditions.
The closing of the Combination is subject to
customary conditions, including but not limited to: (i) certain approvals by CB&I’s shareholders and McDermott’s stockholders; (ii) receipt of regulatory approvals in specified jurisdictions; (iii) satisfaction of the
conditions under the financing commitments or the funding of the financing; (iv) the effectiveness of a registration statement on Form
S-4
that will be filed by McDermott for the issuance of McDermott
Common Stock in connection with the Combination; (v) the approval of the listing of the shares of McDermott Common Stock to be issued in connection with the Combination on the New York Stock Exchange; and (vi) subject to specified
exceptions, limitations and qualifiers, the accuracy of representation and warranties of McDermott and CB&I as of the closing date, including the absence of any material adverse effect with respect to McDermott’s or CB&I’s
business, as applicable.
Representations, Warranties and Covenants.
The Agreement contains customary representations, warranties
and covenants, including, among others, covenants by each of CB&I and McDermott: (i) to conduct its business in the ordinary course; (ii) to cooperate with respect to seeking regulatory approvals; (iii) to cooperate with respect
to the financing; (iv) to hold a meeting of its stockholders or shareholders, as applicable, to consider the approvals contemplated by the Agreement; (v) not to solicit proposals
relating to alternative business combination transactions; and (vi) subject to certain exceptions, not to enter into any discussion concerning or provide confidential information in
connection with alternative business combination transactions.
Termination.
The Agreement contains provisions granting each of
McDermott and CB&I the right to terminate the Agreement under specified conditions, including (i) if the Combination is not completed by June 18, 2018 (unless extended by either party in accordance with the Agreement to a date not
later than December 18, 2018 if certain regulatory approvals here not been received by June 18, 2018); (ii) if either CB&I’s shareholders or McDermott’s stockholders fail to approve a required proposal in connection with the
Combination; (iii) if a final nonappealable governmental order in one of the specified jurisdictions has been issued prohibiting the Combination; (iv) if the other party has breached its representations, warranties or covenants in the
Agreement, subject to certain materiality and “material adverse effect” standards; (v) subject to compliance with specified process and notice requirements, in order to enter a superior alternative business combination transaction; or
(vi) if the other party’s board of directors has changed its recommendation in connection with the Combination. In the event of a termination of the Agreement under certain specified circumstances, including termination by CB&I or
McDermott to enter into a superior alternative business combination transaction or a termination following a change in recommendation by CB&I or McDermott’s board of directors, CB&I or McDermott generally would be required to pay the
other party a termination fee equal to $60 million.
The foregoing description of the Agreement does not purport to be complete and
is subject to and qualified in its entirety by reference to the Agreement, a copy of which is attached hereto as Exhibit 2.1 and the terms of which are incorporated by reference herein.
The Agreement has been included to provide security holders with information regarding its terms. It is not intended to provide any other
factual information about McDermott or CB&I. The representations, warranties and covenants contained in the Agreement were made solely for purposes of the Agreement and as of specific dates, were solely for the benefit of the parties to the
Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Agreement instead of establishing
these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to security holders. Security holders are not third-party beneficiaries under the Agreement and should not
rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of McDermott or CB&I. Moreover, information concerning the subject matter of the representation and
warranties may change after the date of the Agreement, which subsequent information may or may not be fully reflected in McDermott’s or CB&I’s public disclosures.
Financing Commitments
In connection with
the Combination, on December 18, 2017, McDermott entered into a commitment letter (the “Commitment Letter”), pursuant to which Barclays Bank PLC, Crédit Agricole Corporate and Investment Bank and Goldman Sachs Bank USA
(collectively, the “Commitment Parties”) have committed to providing financing for the Combination. The Commitment Letter provides for a fully committed senior secured term loan B facility in the aggregate principal amount of
$1.750 billion (the “Term B Facility”), a fully committed senior secured term loan C facility in the aggregate principal amount of $500 million (the “Term C Facility”), a $1.000 billion senior secured revolving
credit facility (the “Revolving Facility”), a $1.200 billion senior secured letter of credit facility (the “LC Facility” and, together with the Term B Facility, the Term C Facility and the Revolving Facility, the
“Senior Credit Facilities”) and fully committed senior unsecured bridge facilities in an aggregate principal amount of
$1.500 billion, the availability of which is subject to reduction upon McDermott’s issuance of notes in a private placement or equity securities pursuant to the terms set forth in the
Commitment Letter (the “Bridge Facilities” and, together with the Senior Credit Facilities, the “Facilities”).
The
Commitment Parties’ commitments are subject to satisfaction of certain conditions, including (1) the execution and delivery of definitive documentation with respect to the Facilities in accordance with the terms sets forth in the
Commitment Letter, (2) the consummation of the Combination in accordance with the Combination Agreement and (3) the absence of any material adverse effect with respect to CB&I’s business. The foregoing description of the
Commitment Letter does not purport to be complete and is subject to and qualified in its entirety by reference to the Commitment Letter, a copy of which is attached hereto as Exhibit 10.1 and the terms of which are incorporated by reference herein.