On Monday, General Electric agreed to purchase Lufkin Industries, Inc. for $3.3 billion, adding technologies for the gas and oil industry as Jeffrey Immelt, the GE CEO increases his bet on energy.
Shareholders of Lufkin will be paid $88.50 in cash for each share. The deal is scheduled to close during the second half of the year, said GE in a prepared statement. The price of $88.50 is a premium of 38% over the closing price of $63.93 for Friday April 5, for Texas-based Lufkin.
The fastest growing sector for GE is gas and oil, with sales increasing by 57% to more than $15.2 billion over the past 4 years. Immelt fast tracked that expansion by spending $11 billion in purchases over a six-month period in 2011.
An industry expert said that close to 94% of the oils wells now in existence require some type of artificial lift and GE CEO said that the acquisition of Lufkin would give the company a chance to become a comprehensive member in the gas and oil industry.
GE announced it paid close to 13.5 times the 2013 estimated earnings prior to taxes, depreciation and interest for Lufkin. Lufkin posted revenue of more than $1.3 billion in 2012.
One Wall Street analyst said the purchase of Lufkin by GE was a solid fit, but with the price very high considering the different challenges involved in drilling in North America. Lufkin employs close to 4,500 people in over 40 countries and manufactures artificial lift devices.
