LOS ANGELES--(BUSINESS WIRE)--Hotchkis & Wiley, a boutique asset-management firm specializing in long-only value investing, today sent a letter to Gary Luquette, Chairman of McDermott International, regarding the company's merger with Chicago Bridge & Iron (CB&I). Its contents are below.
Hotchkis & Wiley’s clients have been a significant McDermott shareholder since June 2013 and currently own nearly 2% of the company.
David Dickson’s management team has done an outstanding job managing the devastating downturn in McDermott’s core end-markets. We support management’s strong execution and vision for McDermott, but do not support the CB&I transaction as currently structured.
McDermott’s deal for CB&I was tolerable with the facts available at the time, but the situation has worsened materially since the deal was made. CB&I announced troubling results that increase our worry that the business will take longer to fix. The higher risk is also lowering the upside, as the crisis at CB&I is driving the bond market to price McDermott’s unsecured notes to finance the deal at over 10%.
With higher risk and less upside, the transaction as currently structured is materially less attractive than what management negotiated.
Hotchkis & Wiley plans to vote against the transaction as currently structured.
About Hotchkis & Wiley
Since its inception in Los Angeles in 1980, Hotchkis & Wiley has focused exclusively on finding undervalued securities that have the potential for appreciation. As of December 31, 2017, Hotchkis & Wiley managed $32 billion in domestic value equity and high yield assets for institutional and mutual fund investors. The firm is independently owned with a majority interest held by employees.