Investing
GE Gets Bolt-On Deal in Oil and Gas with Lufkin Industries Acquisition
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General Electric Co. (NYSE: GE) is sticking with its plan of making acquisitions, but on the bolt-on and opportunistic side of the equation rather than on the aggressive mega-merger side of M&A. Lufkin Industries Inc. (NASDAQ: LUFK) is the latest announced acquisition for GE, and the company makes artificial lift technologies for the oil and gas industry. The company is also a manufacturer of industrial gears.
Terms of the deal come to approximately $3.3 billion. Lufkin Industries shareholders will receive $88.50 per share in cash for each of their Lufkin shares. Friday’s closing bell price was $63.93 per share, and the 52-week trading range had been $45.11 to $80.04. The market cap as of Friday was about $2.15 billion, according to Yahoo! Finance.
The move is intended to accelerate GE’s growth in artificial lift with solutions for a broader variety of well types and technology for production automation and optimization. The buyout will also add strength and depth to GE’s turbomachinery supply chain from Lufkin’s industrial gears and bearings outfit. GE even went on to say that the acquisition will build on GE’s 2011 acquisition of the well support division of the John Wood Group, hence the bolt-on acquisition.
GE is worth close to $240 billion in market cap, so the deal will not cause any real bump in GE’s operations or finances. GE also said that artificial lift is used in 94% of the approximately 1 million oil-producing sells around the world. The real cost is outlined below:
“The purchase price of $3.3 billion represents a multiple of approximately 13.5x based on 2013 estimated earnings before interest, taxes, depreciation and amortization. In 2012, Lufkin posted record revenues of $1.3 billion, which reflected growth of 37 percent. New business bookings in 2012 grew 38 percent companywide to $1.3 billion year over year, driven by a 47 percent increase in its artificial lift business.”
GE shares are indicated up marginally this morning, and it is fair to say that Lufkin shareholders are going to have a good morning.
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