Toshiba sells Westinghouse to Canada's Brookfield for $4.6 billion
06 January 2018
Bankrupt US nuclear firm Westinghouse Electric Co, which nearly brought its parent company Japan's Toshiba on the brink of collapse, is being sold to Canadian buy-out firm Brookfield Business Partners for $4.6 billion.
Cranberry-based Westinghouse on Thursday announced the signing of a letter of intent with Brookfield, effectively barring other bidders from pursuing their offers.
The deal is expected to close in the third quarter of 2018 and is subject to the approval of Westinghouse's bankruptcy judge. It is, however, still preliminary.
Brookfield's parent company, Brookfield Asset Management, owns gas distribution networks, wastewater facilities, real estate, and wind farms. This would be its first entry into nuclear services.
Brookfield's Westinghouse effort may be a big shift for the in business for the $265 billion assets giant, best known for its investments in office buildings and malls (Brookfield Property Partner, market cap $5.6B), infrastructure (Brookfield Infrastructure Partners, market cap $16.6B) and renewable energy (Brookfield Renewable Partners, market cap $10.8B).
Reports said Brookfield Business Partners is expected to contribute about $1 billion in equity to finance the deal and raise billions more using debt. Brookfield Business Partners will itself finance 50 per cent of the equity check while limited partners and co-investors are likely to supply the rest.
If approved by bankruptcy courts, expected in the third quarter of 2018, Westinghouse would be BBU's biggest ever deal.
"Westinghouse is a high-quality business that has established itself as a leader in its field, with a long-term customer base and a reputation for innovation. We look forward to bringing our significant expertise and reputation as a long-term owner and operator of critical infrastructure in the US and globally, as well as our deep facilities management capabilities, to enhance the Company's position as a leading global infrastructure services provider to the power generation industry,'' Brookfield CEO Cyrus Madon said.
It's not clear what will happen to Westinghouse's new reactor business, which triggered the company's bankruptcy as schedule delays and cost overruns shut down a project to build two AP1000 nuclear power plants in South Carolina and nearly crippled a similar project in Georgia.
Brookfield spokesperson said the company won't pursue any new reactor projects in the US or abroad.
Later on Thursday, Brookfield clarified that "it believes the AP1000 design and technology is core to the company" and said the firm "looks forward to investing in its growth in the US and around the world."
The Toronto-based asset manager did not mention the AP1000 in its statement announcing the deal, focusing instead of Westinghouse's "strong market position" in servicing existing plants.
"The majority of (Westinghouse's) profitability is delivered through regular scheduled services which are provided under long-term contracts" the statement said, referring to the company's nuclear fuel and plant outage activities.
At present, there are only a handful of companies around the world that design nuclear power plants and there is little competition in the business at least in the US with other groups like GE not active in the space in recent years, say reports.
Meanwhile, Westinghouse has submitted a bid for new AP1000 reactors in Saudi Arabia and has been involved in a molasses-paced effort to bring its plants to India.
The deal "reaffirms our position as the leader of the global nuclear industry,'' Westinghouse CEO José Emeterio Gutiérrez said in a statement on Thursday.
Westinghouse spokesperson Sarah Cassella said there would be ''no changes to the current projects or bids expected as a result of the transaction.''
In a note sent to employees, Westinghouse said it does not expect staffing changes during the sales process. ''We do not currently anticipate any further layoffs once the transaction closes,'' she said.
Westinghouse employs a total of about 11,000 personnel , including 3,400 in Western Pennsylvania.
The deal also won't impact Westinghouse's role at Plant Vogtle, the Georgia site where possibly the last two AP1000 plants are being built.
According to statements from both parties on Thursday morning, the deal provides for Brookfield to assume "certain pension, environmental and other operating obligations."
Toshiba bought Westinghouse for $5.4 billion in 2006, a price that was widely considered too big at that time. Now the $4.6 billion price tag has also puzzled investors.