Engineering and construction company McDermott International, Inc. (MDR) said Monday that it plans to separate its operating subsidiaries, The Babcock & Wilcox Co., or B&W, and J. Ray McDermott, S.A., or J. Ray, into two independent, publicly traded companies.
The company expects the separation to be effected through a spin-off of B&W, in a transaction intended to be tax-free to McDermott shareholders. Following completion of the separation, McDermott International intends to be renamed J. Ray McDermott, S.A., and shareholders will own 100% of two separate companies: B&W and J. Ray. The transaction is expected to be completed in nine to 12 months.
B&W is a technology innovator in power generation and is a specialty manufacturer of nuclear components. It supplies nuclear components to the U.S. government's defense programs and manages nuclear facilities and environmental management sites. Between 2006 and 2008, B&W generated an average of over $3 billion in annual revenues, with about $350 million in average annual operating income. Including its joint venture companies, B&W employs over 15,000 people worldwide.
J. Ray is an engineering, construction and installation company focused on the offshore upstream oil and gas market. During 2006-2008, J. Ray generated an average of $2.4 billion in annual revenues with about $245 million in average annual operating income. J. Ray employs nearly 16,000 people worldwide.
McDermott International said the separation of B&W and J. Ray would help each company to be better positioned to accelerate growth based on its distinct corporate strategy, market opportunities, free cash flow and customer relationships. The separation is also expected to provide efficient allocation of capital that would allow each company to develop an independent investment program without the constraints of a holding company structure.
Other benefits of the separation include elimination of the risk posed by recent modifications in the rules under the Federal Acquisition Regulations, which limit the U.S. Government's ability to contract with "inverted" companies and their subsidiaries. Additionally, distinct publicly traded stock could be used as currency for future acquisitions.
According to the company, B&W plans to establish new corporate headquarters in Charlotte, North Carolina, in the near future. The separation is not expected to significantly impact its operational locations, the company noted. B&W will remain incorporated in Delaware and Brandon Bethards will continue to serve as its President and Chief Executive Officer. He will join B&W's Board of Directors upon completion of the transaction. Additionally, John Fees, Chief Executive Officer of McDermott, will join Bethards on the Board of Directors of B&W and will play a key role in establishing B&W as a publicly traded company.
J. Ray's principal executive offices will remain in Houston, Texas and it will be led by Stephen Johnson as President and Chief Executive Officer. Johnson currently serves as President and Chief Operating Officer of McDermott, and will join J. Ray's Board of Directors upon completion of the separation. Johnson, who takes charge on January 1, 2010, succeeds Robert Deason, who will retire at the end of the year. He has over 35 years of experience in the engineering and construction industry.
McDermott's existing corporate management team, including John Fees and Michael Taff, Chief Financial Officer, will continue to lead the company until the separation is completed.
B&W expects to list its shares on the New York Stock Exchange. J. Ray will retain the McDermott "MDR" listing on the New York Stock Exchange.
According to Fees, ''Given that McDermott has historically operated each business independently under the B&W and J. Ray franchises, including separate external credit facilities, we believe this should be viewed as a seamless transition for our customers and employees."
Morgan Stanley & Co. is serving as financial advisor and Baker Botts LLP is serving as legal counsel to McDermott. Goldman, Sachs & Co. is serving as financial advisor and Wachtell, Lipton, Rosen & Katz is serving as legal counsel to the company's Board of Directors.
Last month, McDermott said its third quarter profit increased 38% from last year, as strong growth in the company's offshore oil & gas construction and government operations segments offset weakness in its power generation systems segment. The company's net income increased to $118.1 million or $0.50 per share from $85.6 million or $0.37 per share for the year-ago quarter. Revenue for the third quarter increased to $1.68 billion from $1.66 billion in the same quarter last year.
MDR closed Friday's regular trade at $20.66, down from the previous close of $21.02, on 3.26 million shares. The stock surged $1.84 or 8.91% in pre-market activity and was trading at $22.50.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.