Aside from having teenage-me’s favorite name, Babcock & Wilcox should also be notable to readers of this site for being a 2010 spinoff from engineering firm McDermott (MDR). Always nice to see a potential new grandparent although that 2010 transaction hasn’t been a smashing success for either company (much less so for the parent…but that is a different story). Babcock & Wilcox’s share price climbed steadily for about a year post spin, but the stock has since been stuck in a range as the company has dealt with numerous issues including regulatory uncertainty. Its nuclear related businesses haven’t grown as expected either after the 2011 events at Fukushima tarnished the world’s view of the power source. Earlier this year, the company even laid off 100 employees in its mpower unit which makes small nuclear reactors. Despite these issues, given its relative lack of competition, many still like BWC’s nuclear operations unit (as they did at the time of its original spin) and expect it to get a ‘premium multiple’ versus the power generation unit.
Shares popped on the announcement, which I am sure pleased activist shareholders such as the Blue Harbour Group (6.5%) and the Starboard Value fund (3.4%). The company noted though that there can be ‘no assurance that a separation will occur or, if a separation is approved, its terms or timing’ so perhaps shareholders shouldn’t be too excited. I do think a sale of either or both of the business units is also a very real possibility.
No other details were provided, but the company did promise to reveal some additional information during its Q3 conference call in early November. Stay tuned…
Disclosure: Author holds no position in any stock mentioned,