When Chicago Bridge & Iron ^[1] , a highly regarded construction firm for the energy industry, announced in late July that it planned to pay $3 billion to buy rival Shaw Group ^[2] , Wall Street went nuclear. It would be CB&I's biggest deal ever, and it seemed to come out of the blue, replete with financial and operating risks. Wall Street promptly pummeled the company's shares by 14%.

The stock (ticker: CBI) has since recovered slightly, to a recent $36, but that's still far off its high of $47 early this year.

Investors may have overreacted. The market seems to be overlooking Chicago Bridge & Iron's strong record at managing acquisitions and its promising long-term strategy. If the company can execute as well it has in the past, its stock could surge by as much as 50%.

Despite the deal's risks—CB&I offered to pay 72% more than Shaw's market value before the announcement, and would take on significant debt—the potential payoff is large. Already a titan in designing and building infrastructure for the natural-gas and oil industries—such as transportation pipes and massive storage facilities—CB&I now stands to gain a solid toehold in electricity-generation; Shaw (SHAW) has specialities in upgrading coal-fired plants and building nuclear plants. That will help CB&I reduce its dependency on the natural-gas boom of the past several years, and leave it as one of the biggest, most diversified energy infrastructure companies in the world, with combined revenues of $10.4 billion.

CB&I dates back to 1889, when it was formed to help build America's system of bridges. Now based in the Netherlands with operating headquarters in the Texas oil patch, it last made a sizable acquisition at the end of