Simmons Group Hints It May Bid for McDermott
A group controlled by Dallas investor Harold C. Simmons said Tuesday that it has acquired 5.4% of McDermott International Inc., an oil services and electrical power plant builder, and may seek control of the firm.
Based on the company’s current stock price, such a takeover would be worth about $1.37 billion.
In a filing with the Securities and Exchange Commission, the Simmons group said that although it acquired its stake in McDermott as an investment, it has considered seeking control of the New Orleans-based maker of offshore drilling rigs.
The company is also active in building power-generation systems through its subsidiary Babcock & Wilcox, which builds conventional and nuclear power plants, including the one at Three Mile Island in Pennsylvania.
In the latest earnings period, power equipment accounted for 45% of revenue, while oil services totaled 27%, McDermott said.
Company officials had no immediate comment on the Simmons announcement. The stock price rose marginally, closing at $29.675, up 37.5 cents a share.
After a long battle last year, Simmons was successful in a bid to take control of NL Industries Inc., also active in oil services. That deal had a total value of more than $900 million.
Like NL, McDermott has suffered from the severe cutback in oil drilling exploration that came after the sharp drop in crude oil prices last year.
In the nine months ended Dec. 31, McDermott lost $93 million from operations, compared to a loss of $77 million in the same period in 1985.
A one-time gain of $228 million from the sale of government bonds pushed the company into the black, to show a net gain of $158 million, up from $38 million a year before.
Revenue for the period rose to $2.46 billion from $2.40 billion.
The Simmons group stressed that it has no current plans to seek control of McDermott, but said it may seek control in the future.
Depending on several factors, including market conditions, the group said it may buy more McDermott stock, or sell some or all of its current stake.
Simmons is known as a quick operator who managed to outmaneuver NL management to obtain controlling interest of the firm after a two-month battle. Within minutes of a favorable court ruling allowing his purchase of NL stock to continue, Simmons spent $63 million to take 51.1% of NL’s stock.
His other takeovers include Medford Corp., a Medford, Ore., timber company, and Amalgamated Sugar, based in Ogden, Utah.
He has also had his failures, however. He was outbid in a year-long attempt to take over Sea-Land Corp, although he made an $89-million profit in the bargain.
Simmons, who has a bust of the late actor John Wayne in his office, was named the “Texas Gunslinger” when in 1978 he tried but failed to purchase PSA Inc., the holding company for Pacific Southwest Airlines. The airline is currently being taken over by USAir Group Inc.
The takeover group, which includes Simmons’ Amalgamated Sugar Co. and LA Partnership, said it spent $44.4 million to acquire its 2,014,700 McDermott shares of common stock.
