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Fluor Corp. splits in two
June 8, 2000: 2:28 p.m. ET

A.T. Massey coal mining operations being spun off as separate company
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NEW YORK (CNNfn) - Fluor Corp. is splitting its coal mining unit from its engineering and construction operations, but unlike Microsoft the breakup is voluntary.

To accomplish the tax-free spin-off, disclosed Thursday morning, existing Fluor stock will become Massey Energy shares, and holders will receive shares of new Fluor stock. The old Fluor's name then will be changed to Massey Energy. The move requires shareholder approval and a favorable ruling by the Internal Revenue Service.

The proposed transaction is expected to be completed within six months.

"We believe this transaction will enable the respective management teams to focus more closely on their businesses and provide the flexibility for each company to grow in a way best suited for its industry," Fluor Chairman and CEO Philip Carroll said. He also said he believes the separate issues would attract greater investor interest.

Fluor stock jumped 3-5/16 to 35-9/16 in Thursday afternoon trading.

Massey Energy will be headquartered in Richmond, Va., its current base of operations, and headed by Donald Blankenship, its current president and chief executive.

graphicThe new Fluor (FLR: Research, Estimates) company will include three units -- engineering and construction concern Fluor Daniel; equipment rental, temporary staffing and telecommunications unit Fluor Global Services; and Fluor Signature Services, which provides administrative and support services. All will be headquartered in Aliso Viejo, Calif.

A split will allow the separate companies to flourish and create shareholder value, Bear Stearns analyst Michael Dudas said. Massey Energy is a top 5 U.S. coal producer company while Fluor is a professional services engineering company, Dudas said.

"The valuations of each company will trade higher separately than they would combined," he said.

In 1997, the Asia financial crisis hit Fluor's engineering practice hard, with revenue falling as much as 50 percent. "They're in the process of rebounding, so now they can separate," Dudas said.

Carroll told CNNfn's Street Sweep that the pick up in the Asian economies signaled renewed potential for the new company in the region. (487K WAV) or (487K AIFF)

Dudas has a buy rating and a $50 price target on the stock.

For the fiscal year ended Oct. 31, 1999, Massey reported assets of $2 billion and an operating profit of $147 million on revenue of $1.1 billion. Overall, for the same period, Fluor Corp. reported assets of $4.5 billion with operating profit of $399 million, excluding a special provision, on revenue of $12.4 billion. Back to top


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Fluor Corp.

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