Westinghouse scraps acquisition deal as parent company struggles

In the shadow of multibillion-dollar writedowns for its parent company and more of the same on the horizon, Westinghouse Electric Co. has scrapped a plan to acquire a nuclear safety equipment company in Texas.

The Cranberry-based nuclear power firm had announced in October that it would buy Nuclear Logistics LLC from that company’s Texas-based parent AZZ Inc. A swift closing was expected, but months of negotiations spelled trouble for the deal.

AZZ’s CEO Tom Ferguson told investors earlier this month that “uncertainty in the nuclear markets” was dragging on negotiations.

Noelle Dilts, an equity analyst at Stifel Nicolaus, believes that was code referring to Westinghouse parent company Toshiba’s announcement in late December that it expects to take a writedown on the value of the Cranberry company worth several billions of dollars, stemming from its 2015 acquisition of a nuclear construction firm.

Toshiba hasn’t arrived at a number yet — “At this moment, the figures are still subject to determination, and measures against the possible impact are under study,” Toshiba said in a statement Thursday — but some estimates have gone as high as $6 billion, a result of higher than estimated costs for Westinghouse’s new reactor projects in Georgia and South Carolina.

“We question if Toshiba will allow Westinghouse to complete another (albeit small) deal in the nuclear space following this revelation,” Ms. Dilts wrote in a research note in early January.

Instead, Westinghouse and AZZ announced on Friday that they would be “teaming” up to market Nuclear Logistics’ products.

Westinghouse spokesperson Sarah Cassella said the decision was mutual. “It was becoming obvious that both parties had their own reasons as to why a closing would take additional time,” she said.

It’s not clear what a teaming agreement involves. Ms. Cassella declined to say if Westinghouse would market the products exclusively or give other details about the arrangement.

She couldn’t speculate on what Toshiba’s financial woes spell for the 4,500 Westinghouse employees in the Pittsburgh region or the 12,000 who work at the nuclear firm worldwide. Toshiba owns 87 percent of Westinghouse.

The Japanese conglomerate has been battered by a 2015 accounting scandal that revealed company leaders had deferred booking losses at several divisions, including at Westinghouse.

That same year — in an effort to stem the tide of cost and schedule overruns at its U.S. projects and to put an end to legal battles between Westinghouse, its utility customers and its nuclear construction contractor CB&I Stone and Webster Inc. — Westinghouse struck a deal to buy CB&I Stone and Webster. 

But the $229 million deal has been a thorn for Westinghouse. In calculating post-closing costs, Westinghouse has estimated that CB&I owes it $2 billion, while CB&I's calculus involves Westinghouse paying it $428 million.

In July, CB&I sued Westinghouse to have the matter hashed out in court, but the effort failed and the companies are still working out their differences.

In April of last year, Toshiba took a $2.3 billion writedown on the value of Westinghouse saying that the Japanese company’s overall financial deterioration has made it more difficult to get favorable financing for its segments.

The move had been anticipated by analysts for years, as they suspected Toshiba had overpaid when it bought the Pittsburgh nuclear firm for $5.4 billion in 2006.

Anya Litvak: alitvak@post-gazette.com or 412-263-1455.

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