General Electric close to buying oilfield services company Lufkin Industries: report
08 Apr 2013
General Electric (GE) is close to buying Lufkin Industries Inc, the Nasdaq-listed oilfield services company with a market capitalisation of nearly $2.2 billion, The Wall Street Journal today reported, citing people familiar with the matter.
Founded in 1902, Texas-based Lufkin manufactures and installs power transmission gear boxes, oilfield pumping units and oilfield electrical equipment.
It specialises in artificial lift equipment and automation services that extend the production life of wells.
Its lift equipment services enables oil companies to achieve higher rate of production with lower lifting costs and extend the life of the well, while its power transmission division designs, manufactures and services precision speed increasing gearboxes and specialised bearings for the energy industry and speed reducing gearboxes and couplings for other targeted industrial applications.
The company posted net income of $81.9 million in 2012 on revenues of $1.3 billion.
The proposed deal is part of GE's early 2011 growth strategy to invest in its high-technology industrial businesses. GE's oil and gas unit generated 2012 revenues of $15.2 billion or 15 per cent of the company's overall revenue of $100.1billion.
GE's chief financial officer, Keith Sherin, had said at a February meeting with analysts and investors that the company will make more acquisitions in the industry "over the next couple of years."
GE's oil and gas business' growth was initially boosted by the $11 billion worth of acquisitions done during a six-month period ended in 2011.
It last major purchases in the oil and gas sector was Wellstream Holdings, a manufacturer and supplier of flexible pipe systems to the offshore oil and gas industry, for $1.3 billion (See: General Electric to acquire Wellstream Holdings for £800 million) and its $2.8 billion purchase of the well-support division of British energy services firm John Wood Group Plc. (See: General Electric to buy well-support unit of UK's John Wood for $2.8 billion).