UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.     )

 

CHICAGO BRIDGE & IRON COMPANY N.V.

 

Chicago Bridge & Iron Company N.V. and certain of its affiliates have agreed to purchase all of the outstanding shares of ABB Lummus Global Inc. and ABB Oil & Gas Europe B.V. from ABB Asea Brown Boveri Ltd. and certain of its affiliates. Under Netherlands law, we must obtain the approval of CB&I’s shareholders before we can complete the acquisition. We are sending this proxy statement to CB&I shareholders to ask them to vote in favor of the approval of the acquisition of ABB Lummus Global Inc. and ABB Oil & Gas Europe B.V. If CB&I shareholders approve the acquisition and the acquisition is subsequently completed, CB&I will acquire all of the outstanding shares of ABB Lummus Global Inc. and ABB Oil & Gas Europe B.V. for a net cash purchase price of approximately $850 million, subject to adjustments at closing.

 

This proxy statement is being furnished to CB&I shareholders in connection with the solicitation of proxies by CB&I for use at its special meeting of shareholders. The date, time, and place of the special meeting of the CB&I shareholders are:

 

Date:          , 2007
Time:
Place:

 

This document is a proxy statement for CB&I to use in soliciting proxies for its special meeting of shareholders. Attached is an important document containing answers to frequently asked questions and a summary description of the acquisition (beginning on page 1), followed by more detailed information about CB&I, Lummus Global, the proposed acquisition, and the share sale and purchase agreement. We urge you to read this document carefully and in its entirety. In particular, you should consider the matters discussed under “Risk Factors” beginning on page 23 of this proxy statement.

 

Philip K. Asherman
President and Chief Executive Officer
Chicago Bridge & Iron Company N.V.

 

Neither the Securities and Exchange Commission nor any state securities commission has passed upon the adequacy or accuracy of this proxy statement. Any representation to the contrary is a criminal offense.

 

This proxy statement is dated          , 2007, and is first being mailed to CB&I shareholders on or about          , 2007.

REFERENCES TO ADDITIONAL INFORMATION

 

As used in this proxy statement, “CB&I” refers to Chicago Bridge & Iron Company N.V. and its consolidated subsidiaries, except where the context otherwise requires or as otherwise indicated. This proxy statement incorporates by reference important business and financial information about CB&I from documents that it has filed with the Securities and Exchange Commission but that have not been included in or delivered with this proxy statement. For a listing of documents incorporated by reference into this proxy statement, please see the section entitled “Where You Can Find More Information” beginning on page 51 of this proxy statement.

 

You can obtain any of the documents incorporated by reference into this proxy statement from CB&I through the “SEC Filings” link located on the investor relations page of its website at www.cbi.com or from the Securities and Exchange Commission through its website at www.sec.gov. We are not incorporating the contents of the websites of the Securities and Exchange Commission, CB&I or any other person into this document. We are only providing the information about how you can obtain certain documents that are specifically incorporated by reference into this proxy statement at these websites for your convenience.

 

CB&I will provide you with copies of the documents relating to CB&I incorporated by reference herein, excluding any exhibits to those documents, without charge, if you request it in writing from CB&I at our principal executive offices at Polarisavenue 31, 2132 JH Hoofddorp, The Netherlands, or at our administrative offices c/o Chicago Bridge & Iron Company (Delaware), 2103 Research Forest Drive, The Woodlands, Texas 77380-2624, attention: Investor Relations.

 

In order for you to receive timely delivery of the documents in advance of the CB&I special meeting, CB&I should receive your request no later than          , 2007.

CHICAGO BRIDGE & IRON COMPANY N.V.
POLARISAVENUE 31
2132 JH HOOFDDORP, THE NETHERLANDS

 

NOTICE OF AND AGENDA FOR THE SPECIAL MEETING
OF SHAREHOLDERS TO BE HELD          , 2007

 

To the Shareholders of:

CHICAGO BRIDGE & IRON COMPANY N.V.

 

You are hereby notified that a Special Meeting of Shareholders (the “Special Meeting”) of Chicago Bridge & Iron Company N.V. (“CB&I”) will be held at          , at  :00 a.m. on          , 2007, for the following purpose:

 

To consider and vote upon a proposal to approve and authorize the acquisition of the Lummus Global business of ABB Asea Brown Boveri Ltd. (“ABB”) by CB&I or direct or indirect wholly-owned subsidiaries of CB&I.

 

The acquisition proposal is more fully described in the accompanying proxy statement, which you should read carefully in its entirety before voting.

 

THE BOARD OF SUPERVISORY DIRECTORS OF CB&I HAS CAREFULLY CONSIDERED THE TERMS OF THE SHARE SALE AND PURCHASE AGREEMENT AND THE ACQUISITION AND BELIEVES THAT THE ACQUISITION IS ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, CB&I AND ITS SHAREHOLDERS. THE BOARD OF SUPERVISORY DIRECTORS HAS UNANIMOUSLY APPROVED THE SHARE SALE AND PURCHASE AGREEMENT AND THE ACQUISITION AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL AND AUTHORIZATION OF THE ACQUISITION.

 

It is important that your shares be represented at the special meeting regardless of the number of shares you hold. Please promptly mark, date, sign, and return the enclosed proxy in the accompanying envelope, whether or not you intend to be present at the special meeting. No postage is required for mailing in the United States. Your proxy is revocable at any time prior to its use at the special meeting.

 

Walter G. Browning
Secretary on behalf of the Board of Supervisory Directors

 

          , 2007

TABLE OF CONTENTS

 

 

 

QUESTIONS AND ANSWERS ABOUT THE ACQUISITION AND THE SPECIAL MEETING

 

The following questions and answers briefly address some commonly asked questions about the acquisition and the special meeting. They may not include all the information that is important to you. We urge you to read carefully this entire proxy statement, including the annexes and the other documents we refer to in this proxy statement.

 

Frequently Used Terms

 

We have generally avoided the use of technical defined terms in this proxy statement but a few frequently used terms may be helpful for you to have in mind at the outset. We refer to:

 

 

About the Acquisition

 

 

 

About the Special Meeting

 

 

 

 

General

 

	•	receipt of consents, authorizations, filings and notifications to any relevant competition authorities and the expiration of all applicable waiting periods under such competition laws;
	•	the approval of the shareholders of CB&I;
	•	the consummation of the transactions will not be in any way prohibited by any order and there will not have been any applicable law enacted, promulgated or deemed applicable to the transactions after the date of the acquisition agreement by any governmental entity that prevents the consummation of the transactions or has the effect of making such consummation illegal; and
	•	a member of the ABB group will have paid $204,000,000 to the CE Asbestos PI Trust, on terms that no member of the acquired group is under any liability to reimburse all or any of such sum.

 

SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION

 

Selected CB&I Historical Financial Data

 

We derived the following summary financial and operating data for each of the five years ended December 31, 2002 through 2006 from our audited consolidated financial statements and for the six months ended June 30, 2006 and 2007 from our unaudited consolidated financial statements. You should read this information together with Management’s Discussion and Analysis of Financial Condition and Results of Operations and our Consolidated Financial Statements, including the related notes, incorporated by reference into this proxy statement.

 

 

Selected Historical Financial Data of Lummus Global

 

We derived the following summary financial and operating data for each of the three years ended December 31, 2004 through 2006 from the audited combined financial statements of Lummus Global for the six months ended June 30, 2006 and 2007 from unaudited combined financial information contained elsewhere in this proxy statement. Lummus Global was operated as a division of ABB Ltd. without the need to produce separate U.S. GAAP financial information. We believe that selected historical financial data of Lummus Global for fiscal years ended December 31, 2003 and 2002 is not material to shareholders of CB&I with respect to the vote on the acquisition that is being solicited by this proxy statement. You should read this information together with Lummus Global’s Management’s Discussion and Analysis of Financial Condition and Results of Operations and Consolidated Financial Statements, including the related notes, included in this proxy statement.

 

 

 

NA — Not Applicable

 

Selected Unaudited Condensed Combined Pro Forma Financial Data

 

The following unaudited pro forma condensed combined financial information gives effect to the acquisition of Lummus Global by CB&I, accounted for as a business combination using the purchase method of accounting. The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial information is based on management’s preliminary valuation. The estimates and assumptions are subject to change upon the finalization of valuations, which are contingent upon appraisals of property, plant and equipment, identifiable intangible assets, actuarial valuations of employee benefit plans and adjustments to contract-related and other accounts. Revisions to the preliminary purchase price allocation could result in significant deviations from these pro forma results.

 

The historical results of operations included in the unaudited pro forma condensed combined statement of income for the six months ended June 30, 2007 were derived from the unaudited financial statements of each entity as described above. The historical results of operations included in the unaudited pro forma condensed combined statement of income for the fiscal year ended December 31, 2006 were derived from the audited financial statements of each entity. For CB&I, this information was derived from its annual report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2007, which is incorporated into this proxy by reference. For Lummus Global, this information is included elsewhere in this proxy statement.

 

The historical consolidated balance sheets of CB&I and Lummus Global included in the unaudited pro forma condensed combined balance sheet were derived from the unaudited financial statements of each entity. For CB&I, this information was derived from its quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 2, 2007, which is incorporated into this proxy by reference. For Lummus Global, this information is included elsewhere in this proxy statement.

 

This unaudited pro forma combined financial information has been prepared by CB&I management for illustrative purposes only. The unaudited pro forma combined financial information is not intended to represent or be indicative of the financial position or results of operations in future periods or the results that actually would have been realized had CB&I and Lummus Global been a combined company during the specified periods. Additionally, classifications of certain financial accounts of the acquired company may differ from those of CB&I. The unaudited pro forma combined financial information assumes the acquisition is financed with a combination of cash, borrowings under our credit facility and new term debt. The unaudited pro forma combined financial information on page 46 is qualified in its entirety by reference to, and should be read in conjunction with, the historical consolidated financial statements of Lummus Global included elsewhere in this proxy statement and in CB&I’s Form 10-K filed with the Securities and Exchange Commission on March 1, 2007 and Form 10-Q filed with the Securities and Exchange Commission on August 2, 2007.

 

 

 

INFORMATION ABOUT THE SPECIAL MEETING AND VOTING

 

This proxy statement is being furnished to CB&I shareholders by CB&I’s Board of Supervisory Directors in connection with the solicitation of proxies from the holders of CB&I common shares for use at the special meeting of CB&I shareholders and any adjournments or postponements of the special meeting.

 

Date, Time and Place

 

The special meeting of shareholders of CB&I will be held on          , 2007 at  :00 a.m., at          .

 

Matters to Be Considered

 

At the special meeting, CB&I shareholders will be asked to consider and vote upon a proposal to approve and authorize the acquisition.

 

Shareholders Entitled to Vote

 

The close of business on          , 2007 is the record date for the determination of those holders of CB&I common shares who are entitled to notice of, and to vote at, the special meeting and at any adjournments or postponements thereof. At the close of business on the record date, there were          CB&I common shares outstanding and entitled to vote, held by approximately           holders of record. Admission of shareholders to the meeting and exercise of voting rights at the meeting are governed by Netherlands law.

 

Quorum and Required Vote

 

Each holder of record of CB&I common shares as of the record date is entitled to cast one vote per share at the special meeting on each proposal. There is no required quorum of CB&I common shares necessary to hold the special meeting. The affirmative vote of the holders of a majority of the CB&I common shares present in person or by proxy at the special meeting is required to approve and authorize the acquisition.

 

As of the record date for the special meeting, directors and executive officers of CB&I and their affiliates beneficially owned an aggregate of           CB&I common shares entitled to vote at the special meeting. These shares represent approximately     % of the CB&I common shares outstanding and entitled to vote as of the record date.

 

How Shares Will Be Voted at the Special Meeting

 

All CB&I common shares represented by properly executed proxies received before or at the special meeting, and not properly revoked, will be voted as specified in the proxies. Properly executed proxies that do not contain voting instructions will be voted FOR the approval and authorization of the acquisition.

 

If any other matters are properly brought before the special meeting, the proxies named in the proxy card will have discretion to vote the shares represented by duly executed proxies in their sole discretion.

 

How to Vote Your Shares

 

You may vote in person at the special meeting or by proxy. We recommend you vote by proxy even if you plan to attend the special meeting. You can always change your vote at the special meeting.

 

You may vote by proxy card by completing and mailing the enclosed proxy card. If you properly submit your proxy card in time to vote, one of the individuals named as your proxy will vote your common shares as you have directed. You may vote for or against the proposals submitted at the special meeting or you may abstain from voting.

 

If you hold CB&I common shares through a broker or other custodian, please follow the voting instructions provided by that firm. If you do not return your proxy card, or if your shares are held in a stock

brokerage account or held by a bank, broker, or nominee, or, in other words, in “street name” and you do not instruct your bank, broker, or nominee on how to vote those shares, those shares will not be voted at the special meeting.

 

A number of banks and brokerage firms participate in a program that also permits shareholders whose shares are held in “street name” to direct their vote by the Internet or telephone. This option, if available, will be reflected in the voting instructions from the bank or brokerage firm that accompany this proxy statement. If your shares are held in an account at a bank or brokerage firm that participates in such a program, you may direct the vote of these shares by the Internet or telephone by following the voting instructions enclosed with the proxy from the bank or brokerage firm. The Internet and telephone proxy procedures are designed to authenticate shareholders’ identities, to allow shareholders to give their proxy voting instructions and to confirm that those instructions have been properly recorded. Votes directed by the Internet or telephone through such a program must be received by 11:59 p.m., New York, New York time, on          , 2007. Requesting a proxy prior to the deadline described above will automatically cancel any voting directions you have previously given by the Internet or telephone with respect to your shares. Directing the voting of your shares will not affect your right to vote in person if you decide to attend the meeting; however, you must first obtain a signed and properly executed proxy from your bank, broker, or nominee to vote your shares held in street name at the special meeting.

 

If you submit your proxy but do not make specific choices, your proxy will be voted FOR each of the proposals presented.

 

How to Change Your Vote

 

If you are a registered shareholder, you may revoke your proxy at any time before the shares are voted at the special meeting by:

 

 

Merely attending the special meeting will not revoke any prior votes or proxies; you must vote at the special meeting to revoke a prior proxy.

 

If you hold CB&I common shares through a broker or other custodian and you vote by proxy, you may later revoke your proxy instructions by informing the holder of record in accordance with that entity’s procedures.

 

Solicitation of Proxies

 

In addition to solicitation by mail, directors, officers, and employees of CB&I may solicit proxies for the special meeting from CB&I shareholders personally or by telephone, facsimile, and other electronic means without compensation other than reimbursement for their actual expenses.

 

Arrangements will be made with brokerage firms and other custodians, nominees, and fiduciaries for the forwarding of solicitation material to the beneficial owners of CB&I common shares held of record by those persons, and CB&I will, if requested, reimburse the record holders for their reasonable out-of-pocket expenses in so doing.

CB&I has engaged The Proxy Advisory Group, LLC, to assist in the solicitation of proxies and provide related advice and informational support for a services fee and the reimbursement of customary disbursements that are not expected to exceed $15,000 in the aggregate.

 

Recommendation of the CB&I Board of Supervisory Directors

 

The CB&I Board of Supervisory Directors has unanimously approved the acquisition and the other transactions contemplated by the acquisition agreement. The CB&I Board of Supervisory Directors determined that the acquisition is advisable and in the best interests of CB&I and its shareholders and unanimously recommends that you vote FOR approval and authorization of the acquisition. See “The Acquisition — CB&I’s Reasons for the Acquisition” beginning on page 14 and “The Acquisition — Recommendation of the CB&I Board of Supervisory Directors” beginning on page 15 for a more detailed discussion of the recommendation of the CB&I Board of Supervisory Directors.

 

Special Meeting Admission

 

If you wish to attend the special meeting in person, you must present a form of personal identification. If you are a beneficial owner of CB&I common shares that is held by a bank, broker, or other nominee, you will need proof of ownership of CB&I common shares to be admitted to the meeting. A recent brokerage statement or a letter from your bank or broker are examples of proof of ownership.

 

No cameras, recording equipment, electronic devices, large bags, briefcases, or packages will be permitted in the meeting. If you wish to attend the meeting in person, you must notify CB&I of this fact by no later than          , 2007. Your notice of intent to attend the meeting in person must be received no later than          , 2007 at the following address:

 

Chicago Bridge & Iron Company N.V.
c/o Chicago Bridge & Iron Company (Delaware)
2103 Research Forest Drive
The Woodlands, Texas 77380-2624
(832) 513-1245
Attn: Investor Relations

 

THE ACQUISITION

 

General

 

Pursuant to the terms of the acquisition agreement, certain subsidiaries of CB&I will acquire Lummus Global for a net cash purchase price, including estimated transaction costs, of approximately $850 million, subject to adjustments at closing.

 

CB&I’s Board of Supervisory Directors is using this document to solicit proxies from the holders of CB&I common shares for use at the CB&I special meeting, at which holders of CB&I common shares will be asked to vote upon approval of the acquisition.

 

The Board of Supervisory Directors of CB&I has unanimously approved the acquisition agreement providing for the acquisition of Lummus Global. Subject to the satisfaction or waiver of the conditions to completion, we expect to complete the acquisition in the fourth quarter of 2007.

 

Background of the Acquisition

 

Beginning in late 2002, the Company and ABB engaged in discussions regarding a possible acquisition of Lummus Global. After conducting preliminary due diligence, in early 2003 the Company concluded that it was not interested in pursuing the acquisition of Lummus Global at that time because of certain operational and other issues that Lummus Global was experiencing, but that it might be interested at some time in the future.

 

In March 2007, the Company was advised by Credit Suisse that Credit Suisse had been engaged as financial advisor to ABB to solicit indications of interest with respect to the possible acquisition of Lummus Global. At that time the Company was also provided introductory information about Lummus Global and a form of confidentiality agreement. In late March 2007, after its review of the introductory information and other publicly available information about Lummus Global, the Company advised Credit Suisse that it was interested in the possible acquisition of Lummus Global, and delivered a signed confidentiality agreement.

 

In early April 2007, Credit Suisse delivered to the Company a letter outlining the process and a Confidential Information Memorandum which contained more detailed information about Lummus Global. In addition, in early April 2007 the Company engaged UBS Securities LLC as its financial advisor to assist the Company in evaluating the possible acquisition of Lummus Global.

 

Over the following couple of weeks, the Company evaluated the information included in the Confidential Information Memorandum. On April 23, 2007, Ron Ballschmiede, the Company’s Chief Financial Officer, and Chip Ray, the Company’s Senior Vice President — Corporate Planning, participated in a conference call with representatives of UBS at which time UBS provided its preliminary valuation analysis regarding Lummus Global.

 

On April 29, 2007, the Company submitted its preliminary indication of interest to Credit Suisse.

 

On May 15, 2007, Credit Suisse advised the Company that it had made it to the next round of the process, and would be given access to an electronic data room for purposes of conducting a more detailed due diligence review. Over the following few weeks, a team led by Mr. Ballschmiede and Mr. Ray reviewed the information available in the electronic data room.

 

On June 6, 2007, CB&I formally engaged UBS to act as its financial advisor in connection with CB&I’s proposed acquisition of Lummus Global.

 

On June 7, 2007, the Company’s senior management team and other members of the Company’s transaction team met with the management team of Lummus Global for additional due diligence.

 

On June 12, 2007, the Company’s representatives met with representatives of ABB and were provided for review certain additional legal documentation and other due diligence materials.

On June 20, 2007, ABB provided the Company with a draft Share Sale and Purchase Agreement for review.

 

On June 28, 2007, the Company’s senior management team met with respect to the results of the due diligence review, the status of the process, and the valuation analysis.

 

On June 29, 2007, at a meeting of the Strategic Initiatives Committee of the Company’s Board of Supervisory Directors, the Committee approved senior management’s process with respect to the discussions with ABB.

 

On July 10, 2007, at a special meeting of the Company’s Board of Supervisory Directors, the Company’s senior management updated the board regarding the results of the due diligence review, the status of the process, and its valuation analysis. The board approved the submission of a firm offer for Lummus Global for a purchase price of $700 million to $900 million. For the next few weeks the Company conducted additional due diligence and continued its valuation analysis.

 

On July 12, 2007, the Company submitted its proposed written comments to the acquisition agreement.

 

On July 18, 2007, the Company submitted its so called “best and final” valuation letter indicating that the Company was prepared to offer a purchase price in the range of from $800 million to $900 million for Lummus Global, based upon the terms and conditions of the draft purchase agreement at that time.

 

On July 27, 2007, Credit Suisse advised the Company that it was among the finalists in the process, and that the Company would need to look carefully at its comments to the proposed Share Sale and Purchase Agreement and be more flexible on its proposed purchase price. To assist the Company in that process, the Company conducted confirmatory due diligence regarding certain matters. In addition, on August 2 and 3, the Company met with representatives of the Lummus Global business’s joint venture partners in its CD Tech and CLG joint ventures.

 

On August 3, 2007, legal representatives of the parties met to discuss potential issues regarding foreign intermediary practices of Lummus Global.

 

On August 13, 2007, the Company submitted a revised offer with a proposed purchase price that was within the previous range of $800 million to $900 million.

 

On August 14, 2007, Credit Suisse asked the Company for certain clarifications regarding its offer and its comments to the acquisition agreement.

 

On August 15, 2007, the Company provided the clarifications, and throughout the day representatives of the Company and representatives of Credit Suisse engaged in numerous follow up discussions. That afternoon, Credit Suisse advised the Company that it was chosen to conduct final negotiations with ABB and requested that the Company and its transaction team be in London the following day in order to finalize outstanding issues and the acquisition agreement.

 

On August 16, 2007, the Company’s team arrived in London and began meeting with ABB and its representatives. The parties worked through the next two days and on the morning of August 18, 2007 reached agreement on all outstanding issues and the form of acquisition agreement except for questions that remained outstanding with respect to certain matters pertaining to the foreign intermediary practices of Lummus Global.

 

On August 20, 2007, at a special meeting of the Company’s Board of Supervisory Directors, the Board authorized the Company to proceed with the acquisition after senior management discussed certain aspects of the transaction and after representatives of UBS presented an overview of the financial aspects of the proposed acquisition agreement to the Company’s Board of Supervisory Directors and Walter G. Browning, CB&I’s Vice President, General Counsel and Secretary and Messrs. Asherman, Ballschmiede and Ray, and indicated that UBS was prepared to render its opinion to CB&I’s Board of Supervisory Directors as to the fairness, from a financial view, of the consideration to be paid by the purchasers in the acquisition.

 

Later that day, UBS delivered its oral opinion to CB&I’s Board of Supervisory Directors followed by delivery of its written opinion, dated August 24, 2007, as described under “— Opinion of UBS Securities

LLC — CB&I’s Financial Advisor,” to the effect that, as of those respective dates, and based upon and subject to the assumptions made, matters considered and limitations described in the opinions, the consideration to be paid by the purchasers in the acquisition was fair, from a financial point of view, to CB&I.

 

On August 21, 2007, the Company’s legal representatives were given access to certain additional confidential information and a report relating to the foreign intermediary practices of Lummus Global.

 

On August 23, 2007, representatives of the Company and ABB negotiated the covenant of the acquisition agreement dealing with foreign intermediary practices of Lummus Global.

 

On August 24, 2007, Lummus Global delivered its Disclosure Letter to the Company, and after review the Company confirmed that it did not have any remaining issues on the acquisition agreement.

 

On August 24, 2007, representatives of the Company and ABB executed and delivered the acquisition agreement.

 

CB&I’s Reasons for the Acquisition

 

Following a review and discussion of all relevant information regarding the acquisition, CB&I’s Management Board and its Board of Supervisory Directors have both determined that the acquisition is beneficial to CB&I and its shareholders for the following reasons:

 

 

The acquisition will also provide geographic diversification and a truly global footprint. Lummus Global has a strong presence in both Western and Eastern Europe, while in comparison, CB&I has a minimal presence in Europe (with the exception of the United Kingdom). Lummus Global also has a strong presence in Russia and China, two areas where CB&I has moderate experience. Both companies have a long history in the Middle East, but Lummus Global’s experience is in process technology and CB&I’s is primarily in steel plate structures.

 

Lummus Global customer base will also be complemented by the traditional CB&I service offerings. There is limited overlap between key relationship customers and Lummus Global has strong relationships with several National Oil Companies (NOC’s) that CB&I has historically not been associated with, further strengthening CB&I’s customer base and stability of earnings.

 

 

Recommendation of the CB&I Board of Supervisory Directors

 

After careful consideration of the matters discussed above, the CB&I Board of Supervisory Directors concluded that the proposed acquisition is in the best interest of the shareholders of CB&I.

 

FOR THE REASONS SET FORTH ABOVE, THE BOARD OF SUPERVISORY DIRECTORS OF CB&I HAS UNANIMOUSLY APPROVED THE ACQUISITION AS BEING IN THE BEST INTERESTS OF CB&I AND ITS SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT CB&I’S SHAREHOLDERS VOTE FOR THE APPROVAL OF THE ACQUISITION.

 

Opinion of UBS Securities LLC — CB&I’s Financial Advisor

 

On August 20, 2007, UBS delivered its oral opinion to CB&I’s Board of Supervisory Directors, which was subsequently confirmed by delivery of its written opinion, dated August 24, 2007, to the effect that, as of those respective dates, and based upon and subject to the assumptions, matters considered and limitations described in the opinions, the $839.9 million consideration to be paid by the purchasers in the acquisition was fair, from a financial point of view, to CB&I. The full text of UBS’ opinion is attached as Annex B to this proxy statement. UBS’ opinion was provided to CB&I’s Board of Supervisory Directors in connection with its evaluation of the acquisition. UBS’ opinion is directed only to the fairness, from a financial point of view, to CB&I of the $839.9 million consideration to be paid by the purchasers in the acquisition. The opinion does not address the relative merits of the acquisition as compared to other business strategies or transactions that might be available to CB&I, nor does it address CB&I’s underlying business decision to effect the acquisition. The opinion does not constitute a recommendation to any shareholder as to how such shareholder should vote or act with respect to the acquisition. We encourage you to read UBS’ opinion carefully in its entirety. The summary of UBS’ opinion presented below is qualified in its entirety by reference to the full text of the opinion.

In arriving at its opinion UBS, among other things:

 

 

In connection with its review, with the consent of CB&I’s Board of Supervisory Directors, UBS did not assume any responsibility for independent verification of any of the information provided to or reviewed by UBS for the purpose of its opinion and, with the consent of CB&I’s Board of Supervisory Directors, relied on such information being complete and accurate in all material respects. In addition, with the consent of CB&I’s Board of Supervisory Directors, UBS did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent or otherwise) of Lummus Global, nor was UBS furnished with any such evaluation or appraisal. With respect to the financial forecasts, estimates, synergies, tax benefits and pro forma effects referred to above, UBS assumed, at the direction of CB&I’s Board of Supervisory Directors, that they had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of CB&I as to the future performance of Lummus Global and such synergies, tax benefits and pro forma effects. In addition, UBS assumed, with the approval of CB&I’s Board of Supervisory Directors, that the financial forecasts and estimates, including synergies and tax benefits, referred to above would be achieved at the times and in the amounts projected. CB&I’s Board of Supervisory Directors directed UBS to assume for purposes of its opinion that the aggregate amount of cash payments the purchasers will make at the completion in exchange for all of the outstanding shares of the two companies comprising Lummus Global will be $839.9 million and that Lummus Global will have no debt or unrestricted cash immediately prior to the completion. UBS’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information available to UBS as of, the date of UBS’ opinion.

 

At the direction of CB&I’s Board of Supervisory Directors, UBS was not asked to, and it did not, offer any opinion as to the terms, other than the consideration to the extent expressly specified in UBS’ opinion, of the acquisition agreement or the form of the transaction. UBS did not express any opinion as to the prices at which any securities of CB&I would trade at any time. In rendering its opinion, UBS assumed, with the consent of CB&I’s Board of Supervisory Directors, that (i) the final executed form of the acquisition agreement would not differ in any material respect from the draft of the acquisition agreement referred to above, (ii) the parties to the acquisition agreement would comply with all material terms of the acquisition agreement, and (iii) the acquisition would be consummated in accordance with the terms of the acquisition agreement without any adverse waiver or amendment of any material term or condition thereof. UBS also assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of

the acquisition would be obtained without any material adverse effect on CB&I, Lummus Global, or the acquisition.

 

In connection with rendering its opinion to CB&I’s Board of Supervisory Directors, UBS performed a variety of financial and comparative analyses which are summarized below. The following summary is not a complete description of all the analyses performed and factors considered by UBS in connection with its opinion. The preparation of a financial opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis or summary description. With respect to the selected companies analysis and the selected transactions analysis summarized below, no company or transaction used as a comparison is either identical or directly comparable to CB&I or the acquisition. These analyses necessarily involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading or acquisition values of the companies concerned.

 

Accordingly, UBS believes that its analyses and the summary below must be considered as a whole and that selecting portions of the analyses and factors, without considering all analyses and factors, could create a misleading or incomplete view of the processes underlying UBS’ analyses and opinion. UBS did not form an opinion as to whether any individual analysis or factor, whether positive or negative, considered in isolation, supported or failed to support UBS’ opinion. Rather, UBS arrived at its ultimate opinion based on the results of all the analyses undertaken by it and assessed as a whole, and believes that the totality of the factors considered and analyses it performed in connection with its opinion operated collectively to support its determination as of the date of UBS’ opinion as to the fairness to CB&I, from a financial point of view, of the $839.9 million consideration to be paid by the purchasers in the acquisition.

 

The forecasts and estimates of the future performance of Lummus Global provided to UBS by the managements of CB&I and Lummus Global, in or underlying UBS’ analyses are not necessarily indicative of future results or values, which may be significantly more or less favorable than those forecasts and estimates. In performing its analyses, UBS considered industry performance, general business and economic conditions and other matters, many of which are beyond CB&I’s control. Estimates of the financial value of companies do not purport to be appraisals and do not necessarily reflect the prices at which companies actually may be sold.

 

The consideration to be paid by the purchasers in the acquisition was determined through negotiations between the parties, and the decision to enter into the acquisition agreement was solely that of CB&I. UBS’ opinion and financial analyses should not be viewed as determinative of the views of CB&I’s Board of Supervisory Directors with respect to the acquisition or the consideration to be paid in the acquisition.

 

The following is a summary of the material financial analyses performed by UBS in connection with UBS’ opinion. The order of the analyses described does not represent relative importance or weight given to those analyses by UBS. The financial analyses summarized below include information presented in tabular format. In order to fully understand UBS’ financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of UBS’ financial analyses.

 

Selected Public Companies Analysis.  UBS compared selected financial data of Lummus Global with selected financial data of the following 15 selected publicly traded companies, including CB&I, that operate in the engineering and construction services, or E&CS, industry or the chemical industry:

 

E&CS Companies (U.S.)

 

 

 

E&CS Companies (Non-U.S.)

 

 

Chemical Companies

 

 

UBS considered, among other things, (1) diluted equity values (computed using closing stock prices as of August 17, 2007), (2) enterprise values (calculated as diluted equity value, plus book value of total debt and book value of minority interest, less cash and cash equivalents), (3) enterprise values as a multiple of (a) the last 12 months’ (“LTM”) earnings before interest, taxes, depreciation and amortization, commonly referred to as EBITDA, to the extent such data were available, and (b) estimated calendar years 2007 and 2008 EBITDA, and (4) closing stock prices as of August 17, 2007 as a multiple of estimated calendar years 2007 and 2008 earnings per share, commonly referred to as EPS. UBS then compared the data derived for the selected companies with comparable data for Lummus Global, both including and excluding estimated run-rate synergies as supplied by CB&I’s management. The implied multiples for Lummus Global were based on $543 million adjusted equity consideration to be paid for Lummus Global and $950 million total enterprise value for Lummus Global, in each case as determined by CB&I’s management. The $543 million equity consideration was derived by deducting from the $839.9 million consideration that CB&I’s Board of Supervisory Directors directed UBS to assume will be paid by the purchasers in the acquisition the amount of debt, net of unrestricted cash, Lummus Global will have immediately prior to the completion, as estimated by CB&I’s management. Financial data for the selected companies were based on recent publicly available research analysts’ estimates, public filings and other publicly available information. Estimated financial data for Lummus Global were based on forecasts and estimates, including estimated synergies, provided to UBS by the management of CB&I. This analysis indicated the following implied high, mean, median and low multiples for the selected companies, as compared to comparable multiples implied for Lummus Global in the acquisition:

 

Selected Transactions Analysis.  UBS reviewed the multiples of enterprise value to LTM EBITDA of each of the following 22 selected transactions announced between July 31, 2000 and May 28, 2007:

 

 

UBS considered the enterprise value of each of the selected transactions as a multiple of the LTM EBITDA at the time of the selected transaction, to the extent such data were publicly available. UBS then compared the LTM EBITDA multiples derived from the selected transactions with implied multiples for Lummus Global for the calendar year 2006 EBITDA and estimated calendar year 2007 EBITDA based on a total $950 million enterprise value of Lummus Global as determined by CB&I’s management. This analysis indicated the following implied high, mean, median and low LTM EBITDA multiples for the selected transactions, as compared to the implied calendar year 2006 EBITDA and estimated calendar year 2007 EBITDA multiples for Lummus Global in the acquisition:

 

 

Discounted Cash Flow Analysis.  UBS performed a discounted cash flow analysis to calculate the estimated present value of (i) the unlevered, after-tax free cash flows that Lummus Global was projected by CB&I’s management to generate over the period from September 30, 2007 through December 31, 2011 and (ii) the estimated synergies and tax benefits anticipated by CB&I’s management to result from the acquisition. Estimated financial data, synergies and tax benefits for Lummus Global were based on internal estimates provided to UBS by CB&I’s management. UBS calculated a range of terminal values for Lummus Global by applying terminal LTM EBITDA multiples ranging from 9.5 to 11.5 to estimated EBITDA of Lummus Global for the twelve months ending December 31, 2011. The cash flows and terminal values with respect to the financial data for Lummus Global were then discounted to present value using after-tax discount rates ranging

from 13% to 15%. For purposes of calculating a range of terminal values for the estimated synergies provided to UBS by CB&I’s management, UBS assumed, per CB&I’s management, a 2.5% perpetuity growth rate for estimated revenue synergies and a 0.0% perpetuity growth rate for estimated cost synergies for periods subsequent to calendar year 2013, the final year of the synergy forecasts provided to UBS by CB&I’s management. The cash flows and terminal values (derived by calculating the present value, using after-tax discount rates ranging from 13% to 15%, as of December 31, 2013 of these two perpetuities) with respect to the estimated synergies were then discounted to present value using after-tax discount rates ranging from 13% to 15%. UBS discounted to present value the cash flows related to the estimated tax benefits of the acquisition as provided to UBS by CB&I’s management using after-tax discount rates ranging from 6.5% to 11%, and then for summary purposes UBS used the midpoint of the resulting range of present values of the estimated tax benefits. This analysis indicated the implied equity value reference range for Lummus Global set forth below, after giving effect to the estimated synergies and tax benefits anticipated by CB&I’s management to result from the acquisition, as compared to $543 million adjusted equity consideration to be paid for Lummus Global as determined by CB&I’s management. The $543 million equity consideration was derived by deducting from the $839.9 million consideration that CB&I’s Board of Supervisory Directors directed UBS to assume will be paid by the purchasers in the acquisition the amount of debt, net of unrestricted cash, Lummus Global will have immediately prior to the completion, as estimated by CB&I’s management.

 

 

Miscellaneous.  Under the terms of UBS’ engagement, CB&I has agreed to pay UBS a fee for its services in connection with the acquisition, a portion of which was payable in connection with rendering its fairness opinion and a significant portion of which is contingent upon consummation of the acquisition. In addition, CB&I has agreed to reimburse UBS for its reasonable expenses, including fees, disbursements and other charges of counsel, and to indemnify UBS and related parties against liabilities, including liabilities under federal securities laws, relating to, or arising out of, its engagement. UBS or its affiliates may also participate in the financing by CB&I in connection with the acquisition and, in such event, would receive compensation in connection therewith. In the past, UBS and its affiliates have provided investment banking services to CB&I and ABB unrelated to the acquisition, for which UBS and its affiliates received compensation. In addition, UBS or an affiliate is a participant in a credit facility of CB&I for which it received and, as of the date of its opinion, continued to receive fees and interest payments. In the ordinary course of business, UBS, its successors and affiliates may hold or trade, for their own accounts and the accounts of their customers, securities of CB&I, ABB Ltd. and/or affiliates of ABB Ltd. and, accordingly, may at any time hold a long or short position in such securities.

 

CB&I selected UBS as its financial advisor in connection with the acquisition because UBS is an internationally recognized investment banking firm with substantial experience in similar transactions. UBS is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, leveraged buy-outs, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities and private placements.

 

Accounting Treatment

 

The acquisition of Lummus Global will be accounted for by CB&I using the purchase method of accounting.

 

Regulatory Matters

 

The acquisition is subject to review by the DOJ and the FTC under the Hart-Scott-Rodino Act. The Hart-Scott-Rodino Act, and the rules promulgated under it by the FTC, prevent transactions, such as the acquisition, from being completed until required information and materials are furnished to the DOJ and the FTC and certain waiting periods are terminated or expire. The initial waiting period is 30 days after both parties have filed the applicable notifications, but this period may be extended if the reviewing agency issues a formal request for additional information and documentary material, referred to as a second request. On

September 7, 2007, the parties submitted the notification filings with the DOJ and the FTC. The waiting period under the Hart-Scott-Rodino Act will expire on October 8, 2007, unless each party receives early termination of the waiting period before that time.

 

The DOJ, the FTC and others may also challenge the acquisition on antitrust grounds either before or after expiration or termination of the waiting period. Accordingly, at any time before or after the completion of the acquisition, the DOJ, the FTC or another regulatory agency could take action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the acquisition or permitting completion subject to regulatory concessions or conditions. We cannot assure you that a challenge to the acquisition will not be made or that, if a challenge is made, it will not prevail.

 

Other than as we describe in this document, the approval of any other U.S. federal or state agency or any foreign agency is not a condition to completion of the transaction.

 

Appraisal Rights

 

No appraisal rights are available to shareholders of CB&I in connection with the acquisition.

 

RISK FACTORS

 

In addition to the other information included and incorporated by reference into this proxy statement, including the matters addressed under the caption “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 25, you should carefully read and consider the following risk factors in evaluating the proposal to be voted on at the special meeting of CB&I shareholders and in determining whether to vote for approval and authorization of the acquisition. Please also refer to the additional risk factors identified in the periodic reports and other documents incorporated by reference into this proxy statement and see “Where You Can Find More Information” beginning on page 51.

 

The acquisition is subject to certain conditions to closing that, if not satisfied or waived, will result in the acquisition not being completed.

 

The acquisition is subject to customary conditions to closing, as set forth in the acquisition agreement. The conditions to the acquisition include, among others, the receipt of required approvals from CB&I’s shareholders. If any of the conditions to the acquisition are not satisfied or, if waiver is permissible, not waived, the acquisition will not be completed. In addition, under circumstances specified in the acquisition agreement, ABB or CB&I may terminate the acquisition agreement. As a result, we cannot assure you that we will complete the acquisition. See “The Share Sale and Purchase Agreement — Conditions to Completion” beginning on page 34 for a discussion of the conditions to the completion of the acquisition.

 

CB&I’s actual financial position and results of operations may differ significantly and adversely from the pro forma amounts included in this proxy statement.

 

The unaudited pro forma financial data contained in this proxy statement is not necessarily indicative of the results that actually would have been achieved had the proposed acquisition and CB&I’s other currently contemplated financing transactions related to the acquisition been consummated on the first day of the periods presented, or that may be achieved in the future. We can provide no assurances as to how the operations and assets of both companies would have been run if they had been one company, or how they will be run in the future, which, together with other factors, could have a significant effect on the results of operations and financial position of the combined company.

 

Lummus Global will be subject to business uncertainties and contractual restrictions while the acquisition is pending.

 

Uncertainty about the effect of the acquisition on employees, suppliers, partners, regulators, and customers may have an adverse effect on Lummus Global and potentially on CB&I. These uncertainties may impair the ability of Lummus Global to attract, retain, and motivate key personnel until the acquisition is consummated, and could cause suppliers, customers, and others that deal with Lummus Global to defer purchases or other decisions concerning Lummus Global, or to seek to change existing business relationships with Lummus Global. Employee retention may be particularly challenging during the pendency of the acquisition, as employees may experience uncertainty about their future roles with CB&I. If key employees depart because of issues relating to the uncertainty or difficulty of integration or a desire not to remain with CB&I, CB&I’s business following the acquisition could be harmed.

 

Failure to complete the acquisition could negatively impact the stock price and the future business and financial results of CB&I.

 

There is no assurance that the acquisition will be approved by the CB&I shareholders, and there is no assurance that the other conditions to the completion of the acquisition will be satisfied. If the acquisition is not completed, CB&I will be subject to several risks, including the following:

 

 

 

In addition, CB&I would not realize any of the expected benefits of having completed the acquisition. If the acquisition is not completed, these risks may materialize and materially adversely affect CB&I’s business, financial results, financial condition, and stock price.

 

CB&I will have lower levels of cash and higher levels of indebtedness following the acquisition than immediately prior to the acquisition.

 

Following the acquisition, CB&I will have lower levels of cash and interest income and higher levels of debt and interest expense than immediately prior to the acquisition. As of June 30, 2007, after giving pro forma effect to the acquisition and other currently contemplated related financings, CB&I and its subsidiaries are expected to have approximately $125.5 million of cash and $275.5 million of indebtedness outstanding. See “Unaudited Condensed Combined Pro Forma Financial Data” on page 46 of this proxy statement. The lowers levels of cash and significant level of combined indebtedness after the acquisition may have an effect on available liquidity to fund the future operations of CB&I.

 

The acquisition may be completed even though CB&I or Lummus Global suffers a material adverse change.

 

In general, CB&I may not refuse to complete the acquisition if Lummus Global suffers a material adverse change following the date of the signing of the acquisition agreement. There are certain breaches of the acquisition agreement by the sellers that would permit the purchasers to terminate the acquisition agreement, but only if the sellers fail to cure the breach and fail to take certain permitted actions to protect the purchasers’ right to be compensated fully for such breaches. Accordingly, certain types of changes would not prevent the acquisition from going forward, even if the change would have a material adverse effect on CB&I or Lummus Global.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This proxy statement, including the documents incorporated by reference, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are generally accompanied by words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “could,” “should,” “will,” “project,” “estimate,” “look forward to” and similar expressions which convey uncertainty of future events or outcomes.

 

The expectations set forth in this proxy statement and the documents incorporated by reference regarding, among other things, accretion, returns on invested capital, achievement of annual savings and synergies, achievement of strong cash flow, sufficiency of cash flow to fund capital expenditures, and achievement of debt reduction targets are only CB&I’s expectations regarding these matters. Actual results could differ materially from these expectations depending on factors such as:

 

 

 

Actual actions that CB&I may take after the acquisition may differ from time to time as CB&I may deem necessary or advisable in the best interest of CB&I and its shareholders to attempt to achieve the successful integration of Lummus Global and to react to the economy and CB&I’s market for its services.

 

THE SHARE SALE AND PURCHASE AGREEMENT

 

The following summary of the acquisition agreement is qualified by reference to the complete text of the acquisition agreement, which is attached as Annex A and incorporated by reference into this proxy statement. This section of the proxy statement describes the material provisions of the acquisition agreement, but may not contain all of the information about the acquisition agreement that is important to you. We encourage you to read the acquisition agreement in its entirety. It is an agreement that establishes and governs the legal relationships among the parties to the agreement with respect to the transactions described in this proxy statement. It is not intended to be a source of factual, business or operational information about any of the parties to the acquisition agreement. The representations, warranties and covenants made in the agreement are qualified and subject to important limitations. Furthermore, the representations and warranties may be subject to a contractual standard of materiality or material adverse effect applicable to the parties to the agreement that may be different from those that are applicable to you or may be used to allocate risk among the parties to the agreement rather than establishing matters of fact. Some of these representations and warranties may not have been accurate or complete as of any specified date and do not purport to be accurate or complete as of the date of this proxy statement. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts at the time they were made or otherwise.

 

Share Sale and Purchase Agreement

 

The parties to the acquisition agreement are

 

 

On the terms and subject to the terms and conditions of the acquisition agreement, the US seller agrees to sell 61,160 common shares, with no par value, of ABB Lummus Global Inc. to the US purchaser and the Netherlands seller agrees to sell 225 shares, with nominal value of 100 euros per share, of ABB Oil & Gas Europe B.V. to the Netherlands purchaser. The shares will be sold by the sellers free from all encumbrances, other than encumbrances arising pursuant to the acquisition agreement, together with all rights attaching to the shares as at completion of the purchase of the shares.

 

Date and Place

 

Completion will take place at 12:00 noon (London Time)

 

 

or at such other location, time, or date as may be agreed in writing between the sellers and the purchasers.

 

Consideration

 

The purchase price will be the amount of consideration for the sale of both the US shares and the Netherlands shares (“NL Shares”), as set out below.

 

Consideration for US Shares

 

The consideration for the sale of the US shares will be the sum of:

 

 

 

Consideration for NL Shares

 

The consideration for the sale of the NL shares will be the sum of:

 

 

Inter-Company Debt

 

All net inter-company debt will be settled in cash in dollars on completion. Inter-company debt that is expressed in a currency other than dollars will be converted into dollars as provided in the acquisition agreement.

 

The Sellers’ Warranties

 

The acquisition agreement contains warranties that the sellers made to the purchasers. The assertions embodied in those warranties are qualified by information in a confidential disclosure letter that the sellers provided to CB&I. The disclosure letter contains information that modifies, qualifies and creates exceptions to the warranties set forth in the acquisition agreement. Accordingly, you should keep in mind that the warranties are modified in important part by the disclosure letter. CB&I does not believe the disclosure letter contains information that the securities laws require them to publicly disclose except as discussed in this proxy statement. Moreover, information concerning the subject matter of the warranties may have changed since the

date of the acquisition agreement, and that information may or may not be fully reflected in the parties’ public disclosures.

 

The acquisition agreement contains customary warranties made by the sellers which relate to, among other things:

 

 

Many of such warranties are qualified by reference to the knowledge of the sellers.

 

CB&I’S Warranties

 

The acquisition agreement contains customary warranties made by the purchasers which relate to, among other things:

 

 

Certain Pre-Completion Undertakings

 

Access to Information and Personnel

 

From the date of the acquisition agreement to completion, the sellers will cause each acquired company to afford to the purchasers reasonable access during normal business hours and in a manner that is not likely to be disruptive to the operations of such acquired company, to such acquired company’s personnel, properties, books and records for the purposes of facilitating an orderly transition of the ownership of the acquired companies after completion.

 

Conduct of the Business

 

The sellers will take all action in their capacity as shareholders of Lummus Global to cause the acquired companies to conduct their business in all material respects in the ordinary course from the date of the acquisition agreement to completion.

 

The sellers will procure that, from the date of the acquisition agreement to completion, no acquired company will do any of the following without the prior written consent of the purchasers:

 

 

 

Prior to completion, the sellers will be entitled to exercise, consistent with the terms and conditions of the acquisition agreement, complete control and supervision of the operations of the acquired group.

 

Parent Guarantees and Third-Party Guarantees

 

Pending completion, CB&I will use all reasonable endeavors to cause each relevant member of the ABB group to be irrevocably released (effective as of completion) in full from its obligations with respect to each:

 

 

ABB will procure that, between the date of the acquisition agreement and the completion date, no member of the ABB group will grant or procure any parent company guarantee, third-party guarantee or other similar arrangement in connection with any contract entered into by a member of the acquired group, except:

 

 

ABB will procure that, between the date of the acquisition agreement and the completion date, no member of the ABB group will extend or renew any parent guarantee or third-party guarantee other than where any failure to extend or renew would entitle the beneficiary of the relevant parent guarantee or third-party guarantee to draw on the same prior to completion.

 

CB&I has agreed to deliver to ABB, at closing, a parent company guarantee or letter of credit in an aggregate amount equal to the full amount of all outstanding third-party guarantees and 15% of all outstanding parent company guarantees referenced in the acquisition agreement.

Resignation of Officers and Directors

 

To the extent so requested by the purchasers, the sellers will cause each officer of each acquired company, including each member of the Board of Supervisory Directors (or comparable governing body) of each acquired company and each company secretary, to tender his or her resignation from such position, with effect from the completion date, each such resignation to contain a legally binding confirmation that the relevant officer has no claim against the relevant acquired company, whether as a result of his being asked so to resign or otherwise.

 

The sellers will cause each acquired company to call a meeting of shareholders or directors (or comparable governing body) and/or take such other action as may be required to:

 

 

Inter-Company Arrangements

 

The sellers will procure that, with effect from completion, all arrangements (including intra-group banking, cash pooling and set-off arrangements) between any member of the ABB group, on the one hand, and any acquired company, on the other hand, are terminated (without cost or liability on the part of the Acquired group) except for:

 

 

Completion and Related Matters

 

Failure to Complete

 

Both purchasers and sellers agree to provide certain deliverables upon completion.

 

If the sellers’ completion deliveries are not complied with in all material respects on the completion date, the purchasers will not be obligated to complete the purchase of the shares and may:

 

 

If the purchasers’ completion deliveries are not complied with in all material respects on the completion date, the purchasers will not be obligated to complete the purchase of the shares and may:

 

 

Other Post-Completion Undertakings

 

The acquisition agreement contains additional agreements between sellers and purchasers, whereby the parties agree that, among other things:

 

 

 

Covenants

 

Tax Covenants

 

The sellers have agreed to indemnify the purchasers in respect of certain tax liabilities in the Lummus Global business.

 

Foreign Practices Covenant

 

The sellers and purchasers have agreed to comply with additional covenants regarding the use of intermediaries by Lummus Global provided in Schedule 9 of the agreement. The parties agree that, among other things:

 

 

Guarantees

 

Guarantee by ABB

 

In consideration of CB&I and the purchasers entering into the acquisition agreement, ABB irrevocably and unconditionally guarantees to CB&I and the purchasers as principal obligor, on demand, the due and punctual performance and observance by the sellers of all the obligations of the sellers, and the punctual discharge by the sellers of all the liabilities of the sellers, under the terms of the acquisition agreement and all other transaction documents.

 

Guarantee by CB&I

 

In consideration of ABB and the sellers entering into the acquisition agreement, CB&I irrevocably and unconditionally guarantees ABB and the sellers as principal obligor, on demand, the due and punctual

performance and observance by the purchasers of all the obligations of the purchasers, and the punctual discharge by the purchasers of all the liabilities of the purchasers, under the terms of the acquisition agreement and all other transaction documents.

 

Cost Sharing

 

The parties have agreed to a cost-sharing arrangement for certain environmental issues at a facility of Lummus Global and to a further cost sharing arrangement in relation to one particular legacy contract of Lummus Global.

 

Conditions to Completion

 

Conditions and Waiver

 

Unless waived by written agreement of the purchasers and sellers, the sale and purchase of the shares and the obligations of the sellers and the purchasers to effect completion are in all respects conditional upon the following:

 

 

Endeavors to Fulfill Regulatory Conditions

 

Each of the parties will take all reasonable steps necessary to ensure that the regulatory conditions are fulfilled as promptly as practicable, and in any event prior to the Long-Stop Date.

 

Endeavors to Fulfill Shareholder Approval Condition

 

CB&I will, at its own cost, use all reasonable endeavors to procure the satisfaction of the shareholder approval condition as promptly as practicable following the date of the acquisition agreement.

 

If the shareholder approval condition has not been satisfied on or prior to the Long-Stop Date, CB&I will pay to the sellers a break fee of $25,000,000.

 

The parties agree that the break fee is a genuine pre-estimate of the loss and damage which would be suffered by the sellers in connection with the termination of the acquisition agreement.

 

The sellers undertake to provide to CB&I, in a timely manner, all such information and assistance as CB&I may reasonably require for the purposes of enabling CB&I to prepare and file proxy statements and otherwise to enable CB&I to fulfill its obligations under this section; provided that neither the sellers nor any member of the ABB group will be liable for any liability suffered or any damage, cost or expense incurred by CB&I in connection with such proxy statement or in respect of any information or assistance provided by the sellers in accordance with this section. CB&I will bear the reasonable costs of Ernst & Young for this purpose.

 

Obligation to Fulfill Asbestos Condition

 

ABB undertakes to CB&I that it will procure that the asbestos condition is satisfied by no later than the third business day following the satisfaction of the regulatory conditions and the shareholder approval conditions.

 

Termination Right

 

The acquisition agreement may be terminated by either party, by giving written notice to the other party, if completion has not occurred by 5:00 p.m. (London time) on February 28, 2008 or, if notice is served in accordance with the termination right discussed in the following paragraphs after January 31, 2008, on March 31, 2008 (the “Long-Stop Date”). However, the right to terminate the acquisition agreement under this section will not be available to any party whose failure to perform any of its obligations under the acquisition agreement has been the cause of, or resulted in, the failure of completion to occur on or before the Long-Stop Date.

 

If at any time after the date of the acquisition agreement and prior to completion the purchasers (or either of them) become aware of any breach of the sellers’ warranties or any breach by the sellers of their obligations described in “— Certain Pre-Completion Undertakings — Conduct of Business” above such that, if completion were to have occurred, the purchasers would have been entitled to recover from the sellers, by way of damages for breach of the sellers’ warranties or obligations described in “— Certain Pre-Completion Undertakings — Conduct of Business”, an amount in excess of $50,000,000, then the purchasers may, by notice in writing to the sellers, inform the sellers of such breach, specifying in reasonable detail the alleged breach, including the amount of any claim arising from such breach.

 

Upon receipt of notice, the sellers will have fifteen business days to rectify the breach specified in such notice. If the sellers fail to rectify such breach to the reasonable satisfaction of the purchasers within such period, or if rectification of such breach is not possible, then the sellers may, in their sole discretion, elect:

 

 

 

provided that, any such election must be made in respect of all of such claims.

 

If the amount of any claim referred to above, when substantiated, exceeds $40,000,000, the maximum aggregate liability of the sellers described in “The Sellers’ Limitations of Liability” below, will be equal to the amount of such claim when substantiated plus $10,000,000. If the amount of any such claim, when substantiated, is less than $40,000,000, the maximum aggregate liability of the sellers described in “The Sellers’ Limitations of Liability” below will be $50,000,000.

 

If the sellers do not make an election within twenty business days of receipt of notice, the purchasers will not be obligated to complete the purchase of the shares, and will have the right to terminate the acquisition agreement by giving notice in writing to the sellers by not later than twenty-five business days after service of notice.

 

Upon termination under this section, neither party will have any claim under the acquisition agreement against the other party. However, certain provisions of the acquisition agreement, the surviving provisions, will continue in effect notwithstanding the termination of the acquisition agreement.

 

The Sellers’ Limitations of Liability

 

The liability of the sellers in respect of any claim under the acquisition agreement is limited as provided below. However, the liability of the sellers in respect of any claim pursuant to the tax covenants will be limited as provided in both the tax covenants and this section.

 

Time Limits

 

Neither seller will be liable in respect of any claim:

 

 

Any claim that has been properly notified to the sellers, if not previously satisfied, settled or withdrawn, will be deemed to have been withdrawn six months after such written notice being given to the sellers or, in the case of a contingent liability or a claim as discussed under “— Insured Claims” below applies, three months after that liability becomes an actual liability or, as applicable, after the relevant insurer has refused to meet the claim made on it, unless legal proceedings in respect of such claim have been commenced by being both issued and served.

 

Thresholds

 

Neither seller will be liable in respect of most warranty claims unless and until:

 

 

Maximum Liability

 

The maximum aggregate liability of the sellers for all claims for breaches of the obligations described in “Certain Pre-Completion Undertakings — Conduct of Business” above and most warranty claims will not exceed $50,000,000. The maximum aggregate liability of the sellers for claims for all breaches of the obligations described in “Certain Pre-Completion Undertakings — Conduct of Business” above, all warranty claims, all claims pursuant to the tax covenants and all claims described in “Covenants — Foreign Practices Covenant” above will not exceed $513,000,000.

 

Matters Accounted for in Financial Statements

 

Neither seller will be liable in respect of any warranty claim if and to the extent the fact, matter, event or circumstance giving rise to the warranty claim is expressly provided or reserved for in the balance sheet or is otherwise fairly disclosed in the financial statements.

 

Insured Claims

 

If and to the extent that the amount of any warranty claim is covered by a policy of insurance maintained by the acquired group or the purchasers, the purchasers will use all reasonable endeavors to recover the amount of such warranty claim or such amount that is covered by such policy of insurance prior to making a warranty claim.

Neither seller will be liable in respect of any warranty claim if and to the extent that the amount of such warranty claim is recovered by the acquired group or by either of the purchasers or any of their other affiliates under any policy of insurance maintained by them.

 

Contingent Liabilities and Consequential losses

 

Neither seller will be liable 1) for any warranty claim based upon a liability which is contingent, unless and until such contingent liability becomes an actual liability or 2) for any indirect or consequential loss, loss of profit or loss of reputation suffered by the purchasers or any of its affiliates in connection with a warranty claim or other claim for breach of the acquisition agreement.

 

Matters Disclosed

 

Neither seller will be liable in respect of any warranty claim if and to the extent that the fact, matter, event or circumstance giving rise to such warranty claim is fairly disclosed in the original information memorandum, in the disclosure letter or, in relation to the financial warranties, in a vendors’ due diligence report prepared by Ernst & Young.

 

Tax Savings

 

In calculating the liability of the sellers for any claim for breach of the acquisition agreement (other than a claim under the tax covenants) there will be taken into account the amount by which any tax for which the purchasers or any of their affiliates is now or may in the future be accountable or liable to be assessed is reduced or extinguished as a result of the matter giving rise to such liability and any repayment of tax which would not have arisen but for the matter giving rise to such liability.

 

Right to Cure

 

If a seller breaches the acquisition agreement, the sellers will have the opportunity to cure upon written notice from the purchaser of the breach. The purchasers will be entitled to compensation only if sellers fail to begin remedial action within 30 days of notice, fail to pursue diligent action thereafter at all times until remediation, or fail to remedy the breach within 90 days of notice.

 

Recovery from Third Parties

 

If either of the sellers pays an amount with respect to a warranty claim and the purchasers or any of the acquired companies later recovers an amount which would have reduced the amount of damages under the warranty claim, the purchasers will repay to seller the lesser of the amount recovered from the third party and the amount previously paid by the seller to the purchasers.

 

If the purchaser or any of their affiliates are entitled to recover (whether by insurance, payment, discount, credit, relief or otherwise) from a third Person a sum which indemnifies or compensates the purchasers or such affiliate (in whole or part) in respect of liability or loss which is the subject of a warranty claim, the purchasers or the relevant affiliate will, following the making of a warranty claim, take and continue to take all reasonable steps to enforce such recovery.

 

Double Recovery

 

The purchasers will not be entitled to recover more than once under the acquisition agreement in respect of the same damage suffered.

Miscellaneous Other Limitations

 

The sellers will not be liable for any warranty claim, subject to certain exceptions relating to taxes, if the liability arises or is increased as a result of:

 

 

Neither seller will be liable for any warranty claim, other than a claim for breach of any of the tax warranties to which exclusions apply under the tax covenants, if and to the extent that the liability arises as a result of any voluntary act or omission of the purchasers or any of their affiliates after the date of the acquisition agreement (including, following completion, the acquired companies).

 

Third-Party Claims

 

If the purchasers become aware of any claim by any third party which ought reasonably to be expected to give rise to a claim by the purchasers for breach of the acquisition agreement (other than a claim for breach of any of the tax warranties):

 

 

 

provided that, notwithstanding the foregoing, none of the purchasers and the acquired companies will be required to provide any information or access that such person’s legal advisers have advised would violate applicable law, including competition laws, or the terms of any confidentiality agreement or confidentiality provision in any contract or adversely impact any privilege, including legal professional privilege.

 

Exclusions for Fraud

 

The above limitations on liability will not apply to a claim that arises as a result of fraud by the sellers.

 

Costs and Expenses

 

If the shareholder approval condition has not been satisfied on or prior to the Long-Stop Date, CB&I will pay to the sellers a break fee of $25,000,000.

Except as provided otherwise in the acquisition agreement, each party will pay its own costs and expenses in connection with the negotiation, preparation and performance of the acquisition agreement, including the fees and expenses of such party’s counsel and financial advisers.

 

Variations

 

The acquisition agreement cannot be varied unless it is in writing and signed by or on behalf of the parties.

 

Remedies and Waivers

 

No waiver of any right under the acquisition agreement will be effective unless in writing and will be effective only in the circumstances for which it is given.

 

No delay or omission by any party in exercising any right or remedy provided by applicable law or under the acquisition agreement will constitute a waiver of such right or remedy, subject to the time limits described in “The Sellers’ Limitations of Liability” above.

 

INFORMATION ABOUT CB&I

 

Business

 

Founded in 1889, CB&I is one of the world’s leading engineering, procurement and construction companies, specializing in projects for customers that produce, process, store and distribute the world’s natural resources. With more than 60 locations and approximately 14,000 employees worldwide, CB&I capitalizes on its global expertise and local knowledge to reliably and safely deliver projects virtually anywhere. CB&I is a fully integrated engineering, procurement and construction (EPC) service provider, offering a complete package of conceptual design, engineering, procurement, fabrication, field erection, mechanical installation and commissioning. CB&I’s projects include hydrocarbon processing plants, liquefied natural gas terminals and peak shaving plants, offshore structures, pipelines, bulk liquid terminals, water storage and treatment facilities, and other steel structures and their associated systems. During 2006, CB&I executed more than 500 projects for customers in a variety of industries. Over the last several years, CB&I’s customers have included:

 

 

CB&I provides a wide range of innovative and value-added EPC services, including:

 

Liquefied Natural Gas (LNG).  LNG terminals and similar facilities are used for the production, handling, storage and distribution of liquefied gases. CB&I specializes in providing turnkey liquefaction and regasification facilities consisting of terminals, tanks, and associated systems. These facilities usually include special refrigeration equipment to maintain the gases in liquefied form at the storage pressure. CB&I also provides LNG tanks on a stand-alone basis. Process equipment and refrigerated or cryogenic tanks are built from special steels and alloys that have properties to withstand cold temperatures. Applications extend from low temperature (+30°F to -100°F) to cryogenic (-100°F to -423°F). Customers for these facilities or tanks are primarily from the petroleum, natural gas, power generation and agricultural industries.

 

Refining and Related Processes.  CB&I provides EPC services for customers in the hydrocarbon industry, specializing in refinery and petrochemical process units, gas processing plants, and hydrogen and synthesis gas plants. Refinery and petrochemical process units enable customers to extract products from the top, middle and bottom streams of the crude oil barrel using technologies such as catalytic reforming, vacuum and atmospheric distillation, fuels and distillate hydrotreating, hydrodesulfurization, alkylation, coking, and isomerization. Gas processing plants treat natural gas to meet pipeline requirements and to recover valuable liquids and other enhanced products, through such technologies as cryogenic separation, amine treatment, dehydration and liquids fractionation. Synthesis gas plants generate industrial gases for use in a variety of industries through technologies such as steam methane and auto-thermal reforming, partial oxidation reactors and pressure swing adsorption purification. CB&I also provides engineering services for offshore structures for oil and gas production and pipelines for product distribution.

 

Steel Plate Structures.  Steel plate structures include above ground storage tanks, pressure vessels, and other specialty structures. Above ground storage tanks are sold primarily to customers operating in the petroleum, petrochemical and chemical industries. This industrial customer group includes nearly all of the world’s major oil and chemical companies. Above ground tanks can be used for storage of crude oil, refined products such as gasoline, chemicals, petrochemicals and a large variety of feedstocks for the manufacturing industry. In addition, CB&I provides structures for water storage and treatment as well as liquefied petroleum gas and liquefied nitrogen/liquefied oxygen tanks. Pressure vessels are built primarily from high strength carbon steel plates which may be formed in one of our fabrication shops and are welded together at the job site. Pressure vessels are constructed in a variety of shapes and sizes, some weighing in excess of 700 tons,

with wall thickness in excess of four inches. Typical pressure vessel usage includes process and storage vessels in the petroleum, petrochemical, and chemical industries and egg-shaped digesters for wastewater treatment. Other specialty structures are marketed to a diverse group of customers. Examples of specialty structures include processing facilities or components used in the mining industries. CB&I has designed and erected tanks, pressure vessels, and other specialty structures throughout the world.

 

Directors and Executive Officers

 

For information regarding CB&I’s directors and executive officers, please see CB&I’s Annual Report on Form 10-K, which is incorporated by reference in this proxy statement.

 

Beneficial Ownership of CB&I’s Common Shares

 

For information regarding beneficial ownership of CB&I’s common shares, please see CB&I’s Annual Report on Form 10-K, which is incorporated by reference in this proxy statement.

 

INFORMATION ABOUT LUMMUS GLOBAL

 

Business

 

The operations of Lummus Global include on/near shore engineering, procurement, construction and technology operations used in the oil and gas and petrochemical industries. Lummus Global supplies a range of products and services to the global oil, gas and petrochemical industries, including the design and supply of production facilities, refineries and petrochemical plants. The oil, gas and petrochemical industry is typically divided into two markets:

 

 

Lummus Global is focused mainly in the downstream business and generates its revenues through its segments of engineering, procurement and construction services and project management services (EPC) and engineering services and the licensing of technology to the refining and petrochemical industries. Lummus Global transacts business and operates internationally with customers principally based in the United States of America, the Netherlands, the Czech Republic, Germany, Russia, Algeria, United Arab Emirates, China and Brazil.

 

Lummus Global is recognized for its expertise in ethylene and olefins technologies and hydrocracking. With approximately 2,400 employees worldwide, Lummus Global licenses approximately 70 proprietary technologies and maintains approximately 1,500 patents and patent applications (not including patents and patent applications owed by the joint ventures).

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Lummus Global is a provider of proprietary process technology, project management and engineering, procurement and construction services to the upstream and downstream oil and gas, refining and petrochemical industries. Lummus Global serves global oil and gas customers around the world, delivering technology and engineering solutions.

 

Lummus Global provides services through two business units: Process Technology, and Engineering, Procurement & Construction.

 

Process Technology

 

Process technology is a provider of key petrochemical, refining and gas technologies, proprietary catalysts and specialized equipment. These technologies are critical in the refining of crude oil into gasoline, diesel, jet fuel and lubricants and in the manufacturing of various chemicals and polymers which are used either industrially or in household products, and the processing of natural gas. Process Technology licenses over 70 different technologies/processes, with particular strengths in the areas of olefins (Ethylene/propylene) and derivatives production, and refining hydroprocessing. These technologies are either wholly owned by Lummus Global or are owned jointly, through alliance agreements with catalyst companies, manufacturers or other process licensing companies.

 

The consistent growth in revenue during the past several years is the result of the impact of positive trends in the segment, including increased regulatory requirements promoting the development of new “clean fuels”, growing use of heavy crude oil, increased natural gas consumption as an alternative to petroleum and increased consumption of end products such as polypropylene.

 

 

Six Months 2007 versus Six Months 2006

 

Revenue.  Revenue during the six months ended June 30, 2007 of $185.8 million increased $68.2 million, or 58% compared with the corresponding period in 2006. The increase was primarily due to higher revenue from significant Lummus Global Heat Transfer projects and a large polypropylene license award in Saudi Arabia.

 

Income from Operations.  Income from operations during the six months ended June 30, 2007 of $46.2 million increased $14.3 million, or 45% compared with the prior year period. The increase is a result of higher revenue volume.

 

2006 versus 2005

 

Revenue.  Revenue during 2006 of $294.5 million increased $57.9 million, or 24% compared with 2005. The increase was primarily due to strong ethylene and propylene related activity, as well as the impact of significant Lummus Global Heat Transfer projects.

 

Income from Operations.  Income from operations during 2006 of $67.8 million increased $15.8 million, or 30% compared with 2005. The increase is commensurate with the growth in revenue over the prior year.

 

2005 versus 2004

 

Revenue.  Revenue during 2005 of $236.6 million increased $34.3 million, or 17% compared with 2005. The increase was primarily due to progress on ethylene and propylene projects and higher Lummus Global Heat Transfer volumes.

 

Income from Operations.  Income from operations during 2005 of $52.0 million increased $14.9 million, or 40% compared with 2005. The increase is due to higher volume and improved margins associated with the level of licensing activity in 2005.

 

Engineering, Procurement & Construction

 

Engineering, Procurement & Construction is a long established provider of engineering, design, project and construction management solutions focused on new and retrofit facility projects for the global oil and gas, refining and petrochemical industries. It serves a diverse customer base which includes many of the world’s leading integrated, international, national and independent oil and petrochemical companies. Engineering, Procurement & Construction undertakes both upstream and downstream projects under a variety of contract structures, including Project Management Consultant, Cost Reimbursable, Fixed Price Engineering and Procurement and Lump Sum Turnkey. Within upstream markets, it has experience and capabilities in both onshore and offshore oil and gas production and processing facilities, while in downstream markets, its expertise includes, among others, ethylene plants, hydrocracker, delayed coking facilities and full refineries.

 

Beginning in 2003, ABB undertook a restructuring of its Engineering, Procurement and Construction segment including, among other actions, a de-risking of its project portfolio. During the past several years, revenue has been unfavorably impacted as new awards decreased due to management’s focus on implementing its new strategy. Revenue has also been unfavorably impacted as the backlog of these higher risk projects was being depleted.

 

Prior to adopting the de-risking program, which included shifting to lower risk, lower order value cost reimbursable services, the Engineering, Procurement & Construction segment had focused on growth through

large turnkey orders, which resulted in the segment assuming inherently higher risk. As a consequence, it suffered significant financial losses on a few projects over a period of several years, including the years ending December 31, 2004 through 2006 and the six month period ended June 30, 2006. With the exception of a $3.2 million provision on the Westlake project, there were no additional material provisions recognized associated with these or other projects during the six month period ended June 30, 2007. As of June 30, 2007 approximately $500 million of backlog remained for this segment, of which roughly half was being completed on a cost reimbursable basis, with the remainder being completed on a lump sum basis. Also during the period of adoption of the de-risking program, a prepackaged bankruptcy filing which protects Lummus Global from its current and future asbestos personal injury claims in the United States was instituted. The asbestos related bankruptcy plan and the significant provisions for contract losses are further described in footnotes 15 and 18, respectively, to the Lummus Global audited financial statements included herein.

 

The significant project impacts and the asbestos related expense for each of the three years ended December 31, 2006 and for each of the six month periods ended June 30, 2006 and 2007 are summarized below.

 

 

 

Six Months 2007 versus Six Months 2006

 

Revenue.  Revenue during the six months ended June 30, 2007 of $318.5 million decreased $47.0 million, or 13% compared with the corresponding period in 2006. The decrease was a reflection of the continued shift from full-scope EPC projects to lower order value cost reimbursable work.

 

Income (Loss) from Operations.  Income from operations during the six months ended June 30, 2007 of $8.7 million increased $28.1 million compared with the corresponding period in 2006. The increase was primarily a result of the significant charges recognized in 2006 for the Rio Polimeros and Westlake projects noted in the table above.

 

2006 versus 2005

 

Revenue.  Revenue during 2006 of $693.8 million decreased $157.3 million, or 18% compared with 2005. The decrease was due to the impact of low new orders booked in 2005 as a result of the continuation of management’s change in strategy from the pursuit of large lump sum EPC projects to lower risk cost reimbursable work. Additionally, several large lump sum projects that had generated substantial revenue during 2005 were completed in 2006.

Income (Loss) from Operations.  Loss from operations during 2006 of ($111.4) million increased $111.3 million compared with 2005. The increase was a result of the significant charges recognized on the Rio Polimeros and Westlake projects noted in the table above, as well as higher pre-contract/proposal related costs.

 

2005 versus 2004

 

Revenue.  Revenue during 2005 of $851.2 million decreased $226.1 million, or 21% compared with 2005. The decrease was due to the lack of new lump sum awards and the unfavorable impact of a final settlement on a polypropylene project in the Middle East.

 

Income (Loss) from Operations.  Loss from operations in 2005 of ($79) thousand decreased $28.4 million compared with 2004. The change was primarily a result of significant charges, recognized during 2004, associated with restructuring the U.S. operation and settlement of asbestos claims (as further described in Footnote 15 to the Lummus Global financial statements included elsewhere in this proxy statement).

 

Liquidity

 

At June 30, 2007 and December 31, 2006, 2005 and 2004, cash and cash equivalents totaled $64.3 million, $50.7 million, $68.3 million, and $91.2 million, respectively. Lummus Global utilizes its parent company, ABB Ltd., for bank related services.

 

Operating Cash Flows

 

Six Months Ended June 30, 2007.  During the six months ended June 30, 2007, Lummus Global generated $39.9 million of operating cash flows as profitability and a net decrease in other operating assets and liabilities, net, was partly offset by payments associated with asbestos related obligations.

 

Year Ended December 31, 2006.  During 2006, Lummus Global generated $48.0 million of operating cash flows as lower cash investments in contracts in progress and changes in other operating assets and liabilities, net, were partially offset by operating losses. The level of working capital, of which contracts in progress is a significant component, varies from period to period and is affected by the mix, stage of completion and commercial terms of contracts.

 

Year Ended December 31, 2005.  During 2005, Lummus Global utilized $150.6 million of operating cash flows due to increases in cash investments in contracts in progress and a decrease in accounts payable levels resulting from payments to vendors and subcontractors.

 

Year Ended December 31, 2004.  During 2004, Lummus Global generated $49.7 million of operating cash flows as changes in other operating assets and liabilities, net, were partially offset by a decrease in accounts payable levels resulting from payments to vendors and subcontractors.

 

Investing Cash Flows

 

Six Months Ended June 30, 2007.  During the six months ended June 30, 2007, $10.0 million was utilized for investing activities, resulting from $8.1 million for the purchase of the remaining minority interest of a joint venture and $1.9 million for capital expenditures.

 

Year Ended December 31, 2006.  During 2006, $3.4 million was utilized for investing activities, resulting from $1.7 million of capital expenditures and $1.7 million for partial buyout of a minority partner.

 

Year Ended December 31, 2005.  During 2005, $5.5 million was utilized for investing activities as an investment in a technology company of $9.0 million was partially offset by $4.6 million of proceeds from the sale of certain intellectual property.

 

Year Ended December 31, 2004.  During 2004, $2.9 million was incurred for investing activities primarily resulting from the sale of a business.

Financing Cash Flows

 

During the six months ended June 30, 2007 and the years ended December 31, 2006, 2005 and 2004, Lummus Global’s cash flows for financing activities related to the use of its ultimate parent company, ABB Ltd. and its affiliates, for bank related services.

 

UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL DATA

 

The following unaudited pro forma condensed combined financial information gives effect to the acquisition of Lummus Global by CB&I, accounted for as a business combination using the purchase method of accounting. The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial statements is based on management’s preliminary valuation. The estimates and assumptions are subject to change upon the finalization of valuations, which are contingent upon appraisals of property, plant and equipment, identifiable intangible assets, actuarial valuations of employee benefit plans and adjustments to contract-related and other accounts. Revisions to the preliminary purchase price allocation could result in significant deviations from these pro forma results.

 

The historical results of operations included in the unaudited pro forma condensed combined statement of income for the six months ended June 30, 2007 were derived from the unaudited financial statements of each entity as described above. The historical results of operations included in the unaudited pro forma condensed combined statement of income for the fiscal year ended December 31, 2006 were derived from the audited financial statements of each entity. For CB&I, this information was derived from its annual report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2007, which is incorporated into this proxy by reference. For Lummus Global, this information is included elsewhere in this proxy statement.

 

The historical consolidated balance sheets of CB&I and Lummus Global included in the unaudited pro forma condensed combined balance sheet were derived from the unaudited financial statements of each entity. For CB&I, this information was derived from its quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 2, 2007, which is incorporated into this proxy by reference. For Lummus Global, this information is included elsewhere in this proxy statement.

 

This unaudited pro forma combined financial information has been prepared by CB&I management for illustrative purposes only. The unaudited pro forma combined financial statements are not intended to represent or be indicative of the financial position or results of operations in future periods or the results that actually would have been realized had CB&I and Lummus Global been a combined company during the specified periods. Additionally, classifications of certain financial accounts of the acquired company may differ from those of CB&I. The unaudited pro forma combined financial statements assume the acquisition is financed with a combination of cash, borrowings under our credit facility and new term debt. We are, however, evaluating the option of a public offering of common stock to repay a portion of borrowings, which is not reflected in the pro forma results. The unaudited pro forma combined financial information, including the notes thereto, is qualified in its entirety by reference to, and should be read in conjunction with, the historical consolidated financial statements of Lummus Global included elsewhere in this proxy statement and in CB&I’s Form 10-K filed with the Securities Exchange Commission on March 1, 2007 and Form 10-Q filed with the Securities and Exchange Commission on August 2, 2007.

Chicago Bridge & Iron Company N.V. and Subsidiaries

 

Unaudited Pro Forma Condensed Combined Statement of Income

For the Year Ended December 31, 2006

 

Chicago Bridge & Iron Company N.V. and Subsidiaries

 

Unaudited Pro Forma Condensed Combined Statement of Income

For the Six Months Ended June 30, 2007

 

 

 

 

For 2007:

 

 

For 2006:

 

 

Chicago Bridge & Iron Company N.V. and Subsidiaries

 

Unaudited Pro Forma Condensed Combined Balance Sheet

As of June 30, 2007