(Updates stock prices, adds Subsea 7 formally withdraws bid, paragraphs 3, 4)
By Liz Hampton
HOUSTON, May 2 (Reuters) - McDermott International shareholders on Tuesday approved a merger with Chicago Bridge & Iron Co that creates a vertically integrated onshore and offshore engineering and construction company, thwarting an attempt by offshore drilling contractor Subsea 7 to block the deal.
More than 50 percent of McDermott shareholders supported the merger and approved a 3-to-1 reverse stock split, according to a spokesman. CB&I shareholders also voted in favor the deal, the companies said, and the combination is expected to close on May 10.
Shares of CB&I were up about 5.8 percent to $16.65 in midday trading, while McDermott shares dipped 0.3 percent to $6.74.
Oslo, Norway-based Subsea 7 said on Wednesday it had withdrawn its offer to buy McDermott and would seek other means of expanding its business. In April, it bid $2 billion for McDermott and sought to halt its deal for CB&I.
McDermott last month had rejected Subsea 7's offer, calling it inadequate and reiterating support for the combination with CB&I, which has been valued at roughly $1.68 billion. Subsea 7's $7 per share offer at the time represented a 16 percent premium for McDermott's shares.
Deal-making activity in the oil and gas sector has picked up as international oil prices have recovered to above $70 a barrel follow a deep crash that began in mid-2014. Deal volume was up 19 percent in the first quarter of 2018; however, total value of the deals completed fell 44 percent, according to data from consultancy PwC.
Subsea 7 had said it could revise its offer if McDermott would work with the company to help it see additional benefits of the deal.
Analysts at Bernstein in April said they believed Subsea 7 had to increase its offer to at least $10 per McDermott share to derail the deal with CB&I.
"If they do not, we believe the bid will founder, and the bungled escapade will damage Subsea 7’s credibility," according to a note from Bernstein.
Investment firm Tudor Pickering & Holt advised Subsea 7 on its unsolicited offer, according to two sources familiar with the matter. (Reporting by Liz Hampton; additional reporting by Ron Bousso in London and Nerijus Adomaitis in Oslo; editing by Jonathan Oatis and David Gregorio)