Here is the description of the new company’s operations:
New B&W will continue to be a leader in clean energy and environmental technologies for the power and industrial sectors. New B&W also will provide one of the most comprehensive platforms of aftermarket services to a large global installed base of power generation facilities.
It’s BWC’s boiler business. That description was most certainly crafted by marketing people in order to focus on ‘hotter’ areas like ‘clean energy’ and less on its traditional, fossil fuel customer base. While it does have clean energy business, over 50% of its 2015 estimated consolidated revenues will come from coal and just 18% from renewables. Some of those areas have been under extreme duress as natural gas prices remain low and climate concerns grow. The new company will be well capitalized with a cash balance, a clean revolver and almost no debt though. It is also not planning on paying any dividends so it should have ample cash flow to deploy in order to grow. The pension situation is certainly worth keeping an eye on and check out the most recent Form 10 and the recent investor day presentation for more information on the financials and company strategy.
Post-spin, the parent company will rebrand itself as BWX Technologies and is expected to trade on the NYSE under the ticker ‘BWXT’. Here is how the new enterprise is described:
BWXT is the sole manufacturer of naval nuclear reactors for submarines and aircraft carriers; provides nuclear fuel to the U.S. government; provides technical, management and site services to aid governments in the operation of complex facilities and environmental remediation activities; and supplies precision manufactured components and services for the commercial nuclear power industry.
BWXT will contain the company’s current nuclear operations and for the most part will be tied, for better or worse, to the US government and in particular the Navy. The Roanoke Times notes the new name for the parent company is actually not so new:
The BWX Technologies name is familiar to those who have lived in the Lynchburg area for more than about seven years. In 2007, Lynchburg-based BWXT consolidated with Babcock & Wilcox — both were subsidiaries of McDermott International — following B&W’s 2006 emergence from Chapter 11 bankruptcy. The combined company was dubbed The Babcock & Wilcox Company, the name under which it operates today.
BWC’s current CEO, E. James Ferland will go to the new B&W. Meanwhile, at BWXT, John A. Fees will become the Executive Chairman and Peyton S. (Sandy) Baker will be crowned CEO.
The company’s largest shareholder, activist fund Blue Harbour Group (over 9% of the shares), applauded the move and hoped the company would continue shareholder friendly policies. It went active in the name earlier in 2014 and this Seeking Alpha piece explores their case and the name in a bit more detail. Despite the misleading title, Greenbackd has a nice writeup laying out the company’s operations and background, including its own spinoff from McDermott (MDR) back in 2010.
The nuclear business has always seemed to be the one which most interested investors given its superior margins, stability and potential for growth. Now the company will actually have the opportunity to showcase that asset by itself, but it remains to be seen if it can deliver the goods.
Disclosure: Author holds no position in any stock mentioned.