Babcock & Wilcox to spin off into separate firm

Babcock & Wilcox announced Monday that it will move its corporate headquarters from downtown Lynchburg to Charlotte, N.C., in the near future and become an independent publicly traded company within one year.

The move could affect as few as 12 of B&W’s 2,400 employees in the Lynchburg area because most of B&W’s operating groups will continue to be based in Lynchburg, a company spokesman said.

McDermott will be split into two companies: B&W and J. Ray McDermott S.A.

The company expects the splitto eliminate the risk that new rules on federal government contracts would stop B&W from getting contracts while a subsidiary of McDermott International, which is incorporated in Panama.

B&W spokesman Jud Simmons wrote in an e-mail that the company considered several headquarters locations before choosing Charlotte. He said Charlotte will provide benefits such as “ease of travel” and proximity to lenders, shareholders, customers and business partners.

“We believe this move will strengthen our company, and we believe that anything that benefits B&W also benefits the Lynchburg area,” he said.

The corporate staff includes employees in the areas of human resources, information technology and communications at various company locations, including Lynchburg. “That structure is expected to remain in place, with a fraction of the corporate employees relocating to Charlotte,” Simmons said.

Lynchburg will remain home to B&W’s Nuclear Operations Group, Nuclear Power Generation Group, its Technical Services business and the group that is designing the B&W mPower Reactor. Last week B&W announced that it is leasing a building in Lynchburg that could have office space for up to 300 engineers and designers.

Rex Hammond, president of the Lynchburg Regional Chamber of Commerce, said he was surprised but not daunted when he heard the corporate headquarters would move. “I think with the attributes Lynchburg has, we’ll continue to be part of (B&W’s) plans,” he said. “We’re going to benefit from business changes more often than we’re going to lose on them.”

B&W has been a major employer in the region since the 1950s when it built a factory on Mt. Athos Road. Most of its business today is with the U.S. government. It builds nuclear components for military projects and manages nuclear sites for the Department of Energy.

In July the federal government announced an interim rule that said government agencies couldn’t give new contracts to “inverted corporations,” companies that operate in the U.S. but are incorporated in other countries for tax purposes, and their subsidiaries.

B&W is incorporated in Delaware and pays its taxes accordingly, but its parent company has been incorporated in Panama since 1982 and could be considered an inverted corporation, Simmons said.

“While we believe the new rules under the Federal Acquisition Regulations do not impact any current B&W contracts, they may impact B&W’s ability to enter into new contracts with the U.S. Government, which is our largest customer,” Simmons said.

McDermott’s executives studied the options for moving forward and decided to spin its two major subsidiaries into separate, independent companies. The transition is expected to take nine to 12 months and be tax-free for McDermott shareholders.

When the transition is complete, B&W expects to list its stock on the New York Stock Exchange.

Brandon Bethards, who has been chief executive officer for just over one year, will remain the company’s top official.

McDermott stock closed Monday at $22.86, up $2.20.

Staff writer Alicia Petska contributed.