Offshore oil-and-gas and nuclear- power construction giant McDermott International Inc. is splitting off two key subsidiaries into new, publicly traded companies to avoid risk to one unit’s future federal contracts because of the parent’s overseas incorporation.
McDermott, incorporated in Panama but based in Houston, announced the change earlier this month. With the separation, to be completed in nine to 12 months, Babcock & Wilcox Co. (B&W), the nuclear- and government-business unit incorporated in Delaware, will relocate its base to Charlotte, N.C. The parent firm then will take the name of its offshore energy unit, J. Ray McDermott S.A (J. Ray), which will stay in Houston.
McDermott International says the restructuring will boost the two firms’ business, management and capital-financing prospects. But it also follows changes in the federal acquisition rule, proposed last July, that would bar award of federal contracts to firms incorporated abroad. The U.S. Defense and Energy departments are B&W’s largest customers, analysts say.
Stephen M. Johnson also becomes J. Ray’s CEO on Jan. 1. McDermott president and chief operating officer since April, he also was senior executive vice president at Washington Group International before its sale to URS Corp., as well as a corporate senior vice president and 28-year veteran of Fluor Corp. J. Ray also said on Dec. 21 it completed a deal with Oceanteam ASA, a Norwegian offshore services firm, to acquire major ownership stakes in a joint venture that is building two subsea construction vessels and to partner with that firm to build a third.