McDermott Explores Lummus Technology Sale
Major engineering and construction company McDermott International is mulling a potential sale of its Lummus Technology arm after receiving unsolicited approaches exceeding $2.5 billion for all or part of the business.
The company has retained US investment bank Evercore as the lead advisor on a process that will “explore strategic alternatives to unlock the value of Lummus Technology while maintaining the strategic rationale of engineering, procurement and construction pull-through”.
McDermott did not reveal the names of the companies that have bid for Lummus, which is a leading licensor of proprietary technologies for petrochemicals, refining, gasification and gas processing and a supplier of proprietary catalysts and relating engineering, holding roughly 3,100 patents and patent applications.
“The process of exploring strategic alternatives is part of our ongoing efforts intended to improve McDermott's capital structure, and we plan to use the proceeds from any transaction involving Lummus Technology to strengthen our balance sheet,” said McDermott’s president and CEO David Dickson. “While Lummus is an important business within McDermott, we have decided to undertake a process to fully realize its strategic and financial value.”
The Houston-based group inherited Lummus through its purchase of CB&I in May 2018. CBI had previously purchased Lummus from ABB for $950 million in November 2007.
The announcement has come after the Houston-based group announced poor second-quarter results and lowered its guidance for 2019 overall. Operating income plunged 52% year on year for the period April-June 2019 and McDermott is now anticipating a net loss of $310 million for the full year. The company is said to have hired turnaround consulting firm Alix Partners as an advisor to improve cash flow and stem the recent run of losses.
McDermott added that its previously announced processes to sell the remaining portion of its pipe fabrication business and its industrial storage tank business were ongoing.