General Electric Co’s (GE) US$3.3 billion acquisition of Lufkin Industries marks the industrial conglomerate’s latest effort to strengthen its holdings in petroleum amid a booming oil and natural gas market.
The purchase gives GE a major stake in the technology for drawing hydrocarbons to the surface from reservoirs with low pressure.
Founded in 1902, Lufkin manufactures a variety of tools used in the “artificial lift” of oil and gas, technology used in about 94 percent of oil-producing wells around the world, GE said.
The global artificial lift sector is expected to approach US$13 billion this year, strengthened by the boom of the unconventional oil and gas sectors, especially in the US.
“Advanced technologies, combined with new drilling practices, are revolutionizing the oil and gas industry,” GE Oil & Gas president and chief executive Daniel Heintzelman said in a statement.
GE has made about US$11 billion in acquisitions in the oil and gas industry since 2007, including the additions of Wellstream Holdings, Dresser Inc and Well Support, also in the artificial lift business.
“The acquisition is another step in bolstering GE’s energy-related businesses, which the company has emphasized over the past several years,” Standard & Poor’s said in a research note regarding the Lufkin purchase.
“We see the deal as entirely consistent with GE’s goal to target US$1 [billion to] US$3 billion bolt-on deals in its core industrial businesses,” Citigroup Inc said in a research note.
Lufkin, which is based in Texas, employs about 4,500 workers in 40 countries. Last year, the company reported revenue of US$1.3 billion, an increase of 37 percent from the previous year.
GE proposed to pay Lufkin shareholders US$88.50 per share in cash, 38.4 percent higher than Friday’s closing price.
Lufkin shares traded just below the offer price on Monday, while General Electric shares rose 0.6 percent to US$23.08.