Over the course of the past two days, there have been a few stocks that have increased as shareholders await the results of the bill that could potentially cut taxes. Congress is thought to vote as early as Tuesday if all goes planned. However, not everyone saw an increase. Some stocks witnessed a massive decline, like Chicago Bridge & Iron (NYSE:CBI) and McDermott International (NYSE:MDR). Keep in mind the decline has less to do with the tax bill, and more to do with the merger the two companies announced.
Both Chicago Bridge & Iron and McDermott International shares plummeted today and it’s all because news broke that Chicago Bridge & Iron is selling itself to McDermott International late Monday night. As a result, Wall Street’s heart broke, which caused Tuesday’s massive decline.
McDermott International plunged 12%, while shares of Chicago Bridge dropped almost 11%. When analysts came forward stating that there is no reason to hold onto shares of Chicago Bridge due to the merger, investors became frantic that the company’s energy construction business will also struggle – or continue to struggle – despite the new merger.
Under the terms of the all-stock offer, shareholders of Chicago Bridge will obtain roughly 247 shares of MDR stock for roughly every 100 shares of Chicago Bridge they own. Generally speaking, it is not unusual for the acquirer in a deal such as this to witness its shares fall, but for the most part, the target company’s shares will increase.
What are the Benefits of the Merger?
For the most part, it is thought that this merger will increase the revenue of the companies involved as well as increase the customer base of the new entity. Additionally, the Chicago Bridge-McDermott International merger is forecasted to develop a profitable business model that they can follow going into the future, which will allow for it to deliver the best and the most advanced solutions for potential customers.
According to Chicago Bridge & Iron and McDermott International, the integrated company is thought to bring in annualized cost savings of roughly $250 million by the year 2019.
Featured Image: Depositphotos/© depositedhar
