KBR - KBR Inc

KBR, Inc. (KBR) is an engineering, construction and services company supporting the energy, petrochemicals, government services, industrial and civil infrastructure sectors. The Company provides a range of services through six business units: Government and Infrastructure (G&I), Upstream, Services, Downstream, Technology and Ventures. KBR provide services to a diverse customer base, including international and national oil and gas companies, independent refiners, petrochemical producers, fertilizer producers, and domestic and foreign governments. In April 2008, the Company acquired Turnaround Group of Texas, Inc. (TGI) and Catalyst Interactive. TGI is a Houston-based management and consulting company. Catalyst Interactive is an Australian e-learning and training solution provider that specializes in the defense, government and industry training sectors. In July 2008, the Company acquired BE&K, Inc., an engineering, construction and maintenance services company.

Halliburton's KBR Delays IPO
After U.K. Shipyard Warning

Offer Pushed Back One Day
As Britain Seeks to Review
Impact on Dock Complex

By RUSSELL GOLD and STEVE GELSI
November 15, 2006

Halliburton Co. delayed the initial public offering of its KBR Inc. engineering and government-contracting unit by one day after the British government warned it could take back control of a major shipyard that generates significant profit for the unit.

In a letter this week, the British Ministry of Defence sought to delay the IPO to determine whether the United Kingdom's strategic interests would be preserved by a stand-alone KBR. It wasn't clear whether the additional day would be enough time to address the British government's concerns.

Halliburton, an oil-field-services provider, and KBR declined to comment further.

KBR, formerly Kellogg, Brown & Root, is the majority owner of the Devonport Royal Dockyard, the largest dock complex in Western Europe, and has contracts to refuel the British government's nuclear-submarine fleet. The company, which was initially scheduled to price last night for trading today, is now slated to price today for trading tomorrow, say underwriters.

IPO analysts said they were uncertain what effect the U.K.'s demands would have on the pricing of the deal, which aims to sell 27.84 million shares at $15 to $17 a share. The fact that KBR chose to file an updated prospectus with the new warning, rather than withdraw the offering, indicates the company is determined to go ahead with the IPO despite the U.K.'s concerns; the offering before the amended filing also appeared to be attracting strong investor interest, they said.

The shipyard has been a profitable operation for KBR. Through the first nine months of this year, KBR generated $57 million in operating income from the shipyard. Over the same period, KBR posted operating income of $125 million.

Halliburton plans to separate KBR, first by offering a 20% stake through the IPO and then through a tax-free spinoff in coming months.

According to a KBR financial filing, the British government has sought information about the company's financial stability as a separate company. If Halliburton proceeds with the IPO, the government could take control of the shipyard and reimburse KBR for the fair-market value of the assets. If the British government takes such steps, the minority owners of the shipyard could exercise their rights to buy out KBR.

KBR owns 51% of the complex. London-based Balfour Beatty PLC and Glasgow-based Weir Group PLC, both international engineering firms, own the remainder equally. Both companies declined to comment on the matter.

A spokeswoman for the British Ministry of Defence said, "We are disappointed that they've chosen to go ahead without allowing us the time for the analysis." The spokeswoman said the government retained the ability to take back control of the dockyard when it sold the dockyard. Halliburton bought a majority stake in the shipyard in 1997 and has had a contract to operate it since 1987.

KBR is best known for its work as the U.S. government's largest contractor in Iraq. A global construction and contracting firm, it also builds energy facilities around the world. Halliburton has been discussing separating KBR since 2004, although plans were delayed earlier this year because of what the company said was a bad market for IPOs.

--Denise Jia and Lynn Cowan contributed to this article.

Write to Russell Gold at russell.gold@wsj.com and Steve Gelsi at Steven.Gelsi@dowjones.com

AP

KBR Shares Rise in Trading Debut

Thursday November 16, 4:51 pm ET


By John Porretto, AP Business Writer

Halliburton Unit KBR Debuts, Rising From IPO Price


HOUSTON (AP) -- To understand KBR Inc.'s successful debut Thursday on the New York Stock Exchange, look no further than its prospects for building more energy and petrochemical facilities around the world, analysts say.


Shares of the former Halliburton Corp. unit rose sharply in their market premiere, climbing $3.75, or 22 percent, to close at $20.75 in afternoon trading from the $17 price set Wednesday night for the initial public offering. The shares rose as high as $21.50 in earlier trading.

KBR netted $444.9 million after fees by selling 27.8 million shares in the IPO. Halliburton retained an 83 percent stake in the company, whose market value was $3.4 billion based on the first trading day of KBR shares.

The initial success was not unexpected, some analysts said, despite ongoing government investigations for work KBR has done in Iraq and elsewhere.

Outweighing those concerns, analysts said, is KBR's position as a leading builder of plants that convert natural gas to liquid and other energy-related projects. Along with joint-venture partners, KBR says it's designed and built more than half the world's liquefied natural gas production capacity in the past 30 years.

"As we tap more and more gas beds in Eastern Europe and even in the United States, the liquefying of natural gas for transport represents a huge opportunity for them," said Ben Holmes, publisher of MorningNotes.com, a research firm based in Boulder, Colo.

"This is a well-managed company with a good book of business," Holmes said.

Calyon Securities analyst Mark Urness had a similar take, also citing the potential of KBR's energy and chemicals unit. "The outlook is good," Urness said.

KBR's other business arm is its government and infrastructure unit, which provides military logistics and support services ranging from base construction to food provision.

KBR is the Army's sole contractor for providing food and shelter to the military in Iraq and Afghanistan -- a distinction that's kept it and former parent Halliburton under Congress' microscope in recent years. Democrats have been critical of the dealings, claiming KBR benefited from its ties with Vice President Cheney, who once led Halliburton, the oil-field services giant.

The controversial government contract expires next year, and the Army wants multiple contractors for the services. KBR is bidding again, and some defense analysts are predicting both KBR and competitor IAP, which is run by former KBR executives, will each win one of the 10-year deals that start in 2007.

Halliburton has been eager to spin off KBR, in large part because it's been a drag on Halliburton's earnings. KBR accounted for 42 percent of Halliburton's $5.83 billion in third-quarter revenue but only 10 percent of its $968 million in operating profit.

Analysts say by separating the two, investors will be better able to put a value on the two distinct components. Halliburton's niche is providing technical products and services for oil and gas exploration and production.

KBR, which offered 27.84 million shares, said it expects to receive roughly $441 million from the offering after underwriting fees and expenses. It said in earlier regulatory filings it intends to use proceeds to repay debt to Halliburton subsidiaries.

For now, Halliburton will retain control of KBR with at least an 81 percent stake, or about 135.6 million shares, depending on demand for the overallotment allowance of 4.2 million shares. Credit Suisse, Goldman Sachs and UBS are underwriting the offering.

When Halliburton registered in April to sell a 20 percent stake in KBR, it said it planned to spin off the remainder of the company to its shareholders by April 2007.

Halliburton shares fell 89 cents to $32.66 in afternoon trading Thursday on the New York Stock Exchange. The shares have traded in a range of $26.33 to $41.99 in the past year.

The IPO pricing was announced Wednesday after regular trading ended -- and one day later than initially expected.

KBR said Tuesday that Britain's Defense Ministry had asked it to withdraw the IPO so the ministry could study KBR as a stand-alone entity and its ability to manage a major British shipyard. KBR said the defense ministry threatened to diminish KBR's interest in the shipyard if it continued with the IPO.

KBR officials did not immediately respond to e-mails and telephone calls to determine if the two sides had reached a resolution.

Aside from any operational problems, KBR is under a cloud caused by a series of regulatory and legal investigations. In one, the Department of Justice is investigating allegations the company colluded on bidding for foreign contracts.