CB&I shareholder calls company’s 2013 Shaw Group acquisition a ‘complete and utter disaster’

A Chicago-based stockholder of CB&I is calling for the resignation of the corporation’s president and CEO for “squandering shareholder value on failed transactions,” specifically, the 2013 acquisition of The Shaw Group.

Daniel Cohen, whose investment firm Cohen Capital Management has a 1% share of CB&I stock, says in a letter made public that CB&I’s “regrettable deal” to acquire Shaw for a “reported enterprise value of $2 billion” (the total transaction was valued at $3.04 billion) was supposed to give CB&I access to new revenue lines, additional customers and a broader revenue base.

“Instead, the acquisition has been a complete and utter disaster that continues to cost shareholders to this day,” Cohen writes in a letter to CB&I board chairman L. Richard Flury.

Cohen notes that CB&I’s stock price has tumbled from a high of $89.22 in April 2014 to $31.91 earlier this week, destroying some $6 billion in shareholder value.

“Furthermore, CBI’s total shareholder returns under a decade of leadership with its President and Chief Executive Officer, Mr. Phillip K. Asherman, have been an abysmal 17%,” Cohen writes. “While the S&P 500 has returned over 116% during the period—a staggering difference of over 99%.”

Cohen blames many of the company’s recent problems on CB&I’s acquisition of Shaw and the company’s inability to capitalize on deals in the nuclear power arena.

Cohen’s letter states that after CB&I’s acquisition of Shaw, the company worked on two nuclear projects for over three years without ever being paid for its work. During this time, CB&I continued to tell its shareholders that eventually it would receive a payout for all the money owed in arrears.

“Facing a resulting cash crunch, the company was forced to raise billions of dollars in fresh capital through the debt markets to fund its operations resulting from the billions in losses sustained from the nuclear projects,” Cohen writes. “Subsequent to that, and the loss of many billions of dollars in cash flow, the Company decided to sell its nuclear operations to Westinghouse at another multi-billion dollar loss …”

Cohen suggests he might pursue a proxy fight to replace board members and force the ouster of Asherman if the board is “unwilling to act for its shareholders.”

CB&I officials could not be reached for comment. A call to Cohen’s spokesperson was not returned in time for publication.

Read the full letter here.

—Stephanie Riegel

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