Saturday, January 28, 2006

Halliburton prepares to spin off KBR unit - Financial Times -

By Sheila McNulty in Houston
Financial Times
Updated: 12:43 a.m. ET Jan. 28, 2006

Halliburton, the world's largest diversified energy services, engineering and construction company, on Friday said it was ready to spin off and list its KBR unit, which is the US's biggest private contractor in Iraq, and might also consider selling "some pieces of KBR" outright.

The decision to list 20 per cent of KBR, which had been expected, comes as Halliburton reported the best annual figures in its 86-year history – it earned $2.4bn, or $4.54 per share, in 2005, compared with a full-year net loss of $1bn, or $2.22 per share, in 2004.

Its overall gains were driven not only by KBR but also its Energy Services Group, which has benefited from increased use of its crews and assets amid an industry scramble for oil and gas resources in the high-priced environment.

Halliburton is eager to separate itself from KBR, which, despite bringing in billions of dollars from US military contracts in Iraq, has plagued the parent company with controversy since the war began. Not only was KBR accused of overcharging for services, but critics said KBR was being favoured by the US government for contracts because US vice president Dick Cheney used to run Halliburton. Even though Halliburton has denied any wrong-doing, the controversy has dogged it.

The company had to wait to hive off KBR because the unit was caught up in a bankruptcy restructuring as part of the company's $4bn asbestos settlement.

Dave Lesar, Halliburton president, chairman and chief executive, said Halliburton planned to file for an initial public offering for KBR soon after filing its 10-K financial form with regulators, which should be a matter of months.

"We believe the IPO market in general, and the public market for engineering and construction companies in particular, is very attractive, and a public valuation of KBR would benefit Halliburton's stock price," Mr Lesar said.

"Valuation multiples of publicly traded engineering and construction firms are currently very favourable."

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