Bidder’s Changed Offer Prompts Fluor to Scrap Plan to Sell Leasing Unit

In a blow to its year-old streamlining program, Fluor Corp. said Wednesday that it has canceled its plan to sell its American Equipment leasing unit after the top bidder for the $700-million-a-year company changed its offer in response to falling market conditions.

Irvine-based Fluor provided no details, but it is likely the unidentified bidder wanted to lower the agreed-upon purchase price.

In a brief statement Wednesday, Fluor said the bidder insisted on a “substantial alteration” to terms of the deal in the face of “perceived changes in external market circumstances.”

Fluor, whose stock has lost about 34% of its value in the past year, has been trying to pare operating expenses and to concentrate its Fluor Daniel engineering and construction services subsidiary.

American Equipment makes money for Fluor Daniel by leasing and selling heavy construction equipment but is not considered part of the company’s core business.

A Fluor spokeswoman said cancellation of the sale would not have a material impact on Fluor’s corporate earnings--although the company had been buying back stock in anticipation of selling the heavy equipment businesses and has taken on millions of dollars in short-term debt to help finance the stock purchases.

“Our projected operating cash flow is sufficient to support the company’s operating and investment needs, as well as service the short-term debt connected with the stock repurchase efforts,” said Jim Rollans, Fluor’s corporate chief financial officer.

In all, Fluor has bought 8.3 million of its shares at a cost of $375 million. While the company is authorized to acquire up to 10 million shares in the buyback program, it has opted to stop making purchases for the time being, said spokeswoman Lisa Boyette.

Fluor says that because American Equipment is profitable, keeping it as part of Fluor Daniel will not hurt the company. “We see continuing opportunities to enhance its future growth and asset value through additional investment,” said Jim Stein, Fluor Daniel’s president.

Separately, the owners of a $100-million gold mine in Chile said Wednesday that they are preparing to enter nonbinding mediation with Fluor over claims of construction defects at the Refugio mine, which Fluor built.

Fluor and Canadian firms Bema Gold Corp. of Vancouver and Kinross Gold Corp. of Toronto will hash out technical issues involving construction processes and subcontractor liability in the sessions.

If Fluor is held potentially accountable, a binding arbitration session could be scheduled and the two gold companies would file a claim for specific damages.

Mechanical problems at the mine have prevented it from achieving planned production rates, Bema’s chief executive, Clive Johnson, said at an investment conference in Denver. The mine has “yet to do what we paid Fluor to do,” Johnson said.

Fluor, however, says the mine “has already achieved planned performance rates and Fluor Daniel does not believe it has any financial responsibility” to either Bema or Kinross, said Boyette.

Fluor stock gained 81 cents a share in moderate New York Stock Exchange trading Wednesday to close at $37.44. That’s about 17% less than the $45.17 average cost of the shares Fluor has repurchased since March.

*

Bloomberg News contributed to this report