A New York investment group issued a report blasting The Shaw Group’s proposed $3 billion sale to CB&I as a “sweetheart transaction” that was prompted by the political ambitions of Shaw founder and head J.M. Bernhard Jr.
The Denali Group said that the Baton Rouge engineering, construction and environmental firm should be valued at between $50 to $70 a share as an ongoing concern and $60 to $85 per share with a control premium. Under the current deal, CB&I will pay $46 a share for Shaw stock. Shares of Shaw closed at $44.36 Thursday.
Denali, which said it owns shares and options in Shaw, said in the report it wants shareholders to vote against the deal and for the company to hire independent advisers to run an auction and get maximum shareholder value.
“We will continue to take all actions to protect our investment,” the group said in the report.
In a statement, Shaw defended the merger. The company also said that it has been unable to substantiate that Denali actually owns any shares of company stock.
“We firmly believe the transaction with CB&I is in the best interest of and creates significant value for Shaw’s shareholders, as well as our employees and customers,” company spokeswoman Gentry Brann said in an email. “We absolutely believe the transaction offers a fair value, with an attractive 72 percent premium for our shareholders.”
Denali issued the white paper Wednesday, in advance of Shaw’s quarterly earnings report coming out Friday morning. The paper notes that Shaw is not having a customary conference call with analysts and reporters after the earnings announcement, although CB&I will hold a conference call Monday.
Shaw and CB&I shareholders are set to vote sometime next month on the merger.
This is the latest salvo Denali has fired against the proposed merger. In August and September, it sent letters to the Shaw board of directors, calling for an appropriate premium for shareholders and demanding formation of a special committee to investigate Bernhard’s potential conflicts of interest. Both letters were soon relayed to the public.
According to Denali, Bernhard is likely to run in 2014 for the U.S. Senate seat now held by Sen. Mary Landrieu or for the governor’s office in 2015, when Gov. Bobby Jindal’s second term is up. The paper says Bernhard is rushing the sale of his company in order to campaign for one of the seats.
Bernhard was chairman of the Louisiana Democratic Party from January 2005 to September 2005. Because of his past involvement in politics and the fact he could self-finance a statewide campaign, over the years Bernhard has been mentioned as a potential candidate for a variety of jobs.
“The claim that Shaw is selling the company for any other reason is entirely ridiculous,” Brann said in a statement.
Several lawsuits aimed at blocking the Shaw sale have been filed by shareholders in local District Court.