GE buys Lufkin Industries

GENERAL Electric (GE) has agreed to buy Lufkin Industries for about $3.3bn to add technologies for the oil and gas industry as CEO Jeffrey Immelt widens his bet on energy.

GENERAL Electric (GE) has agreed to buy Lufkin Industries for about $3.3bn to add technologies for the oil and gas industry as CEO Jeffrey Immelt widens his bet on energy.

Lufkin shareholders will receive $88.50 per share in cash, and the deal should close in the second half, GE said yesterday. The price is 38% more than the $63.93 closing for the Texas-based target on Friday.

Oil and gas is GE’s fastest-growing segment, with sales up 57% to $15.2bn since 2009, and Mr Immelt accelerated that expansion with $11bn of purchases during a six-month period ended in 2011. Lufkin provides “artificial lift”, which helps bring hydrocarbons to the surface in low-pressure reservoirs and boosts efficiency in natural wells.

“As high as 94% of existing oil wells are going to require some form of artificial lift,” GE Oil & Gas CEO Daniel Heintzelman said. “This gives us more of a chance to become a comprehensive player.”

Last year, Lufkin posted sales of $1.3bn.

Reports said in September that Lufkin was shaping up as a deal target after the company fell to its lowest valuation in almost three years.

“The fit is solid,” Sanford C Bernstein analyst Steven Winoker, who holds a market perform rating on GE, wrote. “The price seems very high considering the challenges and expectations in North American drilling.” Bloomberg