Shaw Group Inc., a provider of engineering and construction services for the energy, chemical and construction industries, announced Wednesday that it plans to pay $1.08 billion (euro850 million) for a 20 percent stake in the group acquiring Westinghouse Electric Co., a producer of atomic power plant equipment.
Under the plan, Japan's Toshiba Corp. will own 77 percent of Westinghouse and the remaining 3 percent will be owned by Ishikawajima-Harima Heavy Industries Co. Ltd. Shaw said it would finance its part of the acquisition through a private placement of bonds.
Shaw also said Wednesday it would book a fourth-quarter charge related to cost overruns on a clean fuels project. The company, which did not specify the size of the charge, blamed the overruns on escalating expenses related to hurricanes Katrina and Rita, as well as delays. Shaw said some of the extra expense may be recoverable.
Toshiba agreed earlier this year to acquire Westinghouse, based in Monroeville, Pennsylvania, from British Nuclear Fuels Ltd. for $5.4 billion (euro4.2 billion). Toshiba said Wednesday that it expected to complete the deal by the end of this month.
Toshiba said Wednesday in Tokyo that it had cleared all antitrust reviews and completed all the necessary regulatory filings in both the U.S. and the European Union as of the end of September.
During a conference call with investors, Shaw chairman James Bernhard said the combination of Shaw's engineering and design services in the nuclear industry, along with Westinghouse's expertise in nuclear power equipment, would "help solve the world's long-term energy needs."
Under the deal, Shaw said it would get certain exclusive agreements for engineering, procurement and construction services on future Westinghouse AP 1000 nuclear power plants, the chosen design for 10 proposed new power units in the United States and four in China.
For the three months ended Aug. 31, Shaw now forecasts earnings from continuing operations between 15 cents and 18 cents per share. Analysts polled by Thomson Financial are looking for profit of 28 cents per share, on average. Consensus estimates typically exclude one-time charges and gains.
Shaw also issued guidance for the current fiscal year, pegging profit between $1.30 and $1.60 per share. That brackets the average Wall Street estimate of $1.53 per share. In addition, the company forecasts 2007 operating cash flow of $300 million (euro236.52 million) to $350 million (euro275.94 million), and said it will report a record backlog of more than $9 billion (euro7.1 billion) as of Aug. 31.
Shaw said its fiscal 2007 guidance reflects the planned investment the Westinghouse acquisition.
In afternoon trading on the New York Stock Exchange, Shaw Group shares were up $2.67, or 11.3 percent, at $26.33. The shares have traded in a 52-week range of $19.55 to $36.08.
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