Capital Markets

Halliburton Plans IPO for KBR

Government probes continue into the energy and construction unit's dealings in Iraq and into possible bribery of Nigerian officials.
Stephen TaubApril 17, 2006

Halliburton will sell a piece of its KBR subsidiary through an initial public offering.

In a regulatory filing, the engineering, construction, and services company (formerly Kellogg, Brown & Root) announced plans to offer up to $550 million of stock, representing nearly 20 percent of outstanding shares. Proceeds are expected to be used primarily to repay debt to Halliburton, added a press release. According to MarketWatch, KBR owes its parent company $774 million related to a 7.5 percent note due in 2010.

Halliburton does not expect to retain any interest in KBR stock after the IPO, the filing also stated.

KBR generates more than half its revenue from U.S. government contracts related to the Iraq war, reported Reuters. It has been a lightning rod for opponents of the war — and the subject of various government probes — because of at least one large no-bid contract, as well as Halliburton’s ties to vice president Dick Cheney, a former chairman and chief executive officer of the company.

An earlier Halliburton filing also disclosed that the Department of Justice and the Securities and Exchange Commission are investigating possible bribery of Nigerian officials. The investigation concerns the construction and expansion of a natural-gas liquefaction complex and related facilities at Bonny Island, Nigeria, by a private limited liability company named TSKJ, which is 25 percent owned by KBR.

Halliburton spokeswoman Cathy Mann told The Wall Street Journal that the company has told investors about the investigations for some time and that Halliburton pushed ahead because “we believe the IPO market is attractive.” Added Mann, “The market has had the opportunity to absorb our ongoing disclosure.”

KBR is credited with more than half the global market share for building liquefied natural gas facilities, a market that is expected to double in size by 2012, according to the Journal. It has also been a dominant builder of gas-to-liquids and ethylene plants, the newspaper added.