"This is a highly compelling transaction that will create significant value for our shareholders," said Philip Asherman, president and chief executive of CB&I.

"By adding them into the CB&I family, we will become fully diversified across the entire energy sector. We will have the capacity and the expertise to provide our clients with the full range of solutions, wherever they are in the world," he added, in a statement.

Cannacord Genuity analyst Yuri Lynk said that the premium priced deal give a lift to the depressed valuation of Fluor ( FLR) and Jacobs Engineering ( JEC), while signaling little upside to current stock multiples of construction contractors Aecon Group, Bird Construction and The Churchill Group.

CB&I said it will finance the acquisition using cash on the balance sheets of both companies, along with roughly $1.9 billion in debt financing from Bank of America and Credit Agricole. Following the closing of the deal, CB&I said that Shaw Group Chairman and CEO J.M Bernhard Jr. will "pursue new business and public service interests."

Monday's merger comes amid a rebound in industrial M&A as some industrhy players try to scale their operations globally and into new products. In May, engineering giant Eaton ( ETN) said it will buy electrical equipment supplier Cooper Industries ( CBE) for $11.8 billion, making the industrial merger the largest U.S. acquisition of 2012, and bolstering expectations for additional M&A in the sector.

A near $4 billion acquisition of Thomas & Betts ( TNB) by European giant ABB ( ABB) in January signaled that after a post-crisis focus on bolstering capital, bets on a cyclical upturn in industrial spending could spark more deals.

-- Written by Antoine Gara in New York

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