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GE To Buy Lufkin

Posted on April 8, 2013

GE  and Lufkin Industries Inc. have announced today a joint agreement whereby GE will acquire Lufkin Industries Inc., a provider of artificial lift technologies for the oil and gas industry and a manufacturer of industrial gears  The deal is reportedly worth approximately $3.3 billion with Lufkin shareholders will receive $88.50 per share in cash for each of their Lufkin shares.

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.

Artificial lift, used in 94 percent of the roughly 1 million oil-producing wells around the world, helps lift hydrocarbons to the surface in reservoirs with low pressure and improves the efficiency of naturally flowing wells. Upon close, GE said Lufkin is expected to broaden its Oil & Gas’ artificial lift capabilities beyond electric submersible pumps (ESPs) to include rod lift, gas lift, plunger lift, hydraulic lift, progressive cavity pumps and a sophisticated array of well automation and production optimization controls and software. The ESP category of artificial lift is the only lift segment in which Lufkin does not currently compete.

Further, GE said Lufkin is already one of its turbomachinery suppliers for turbo gearing and specialty bearings products.

Headquartered in Lufkin, Texas, with approximately 4500 employees in more than 40 countries, Lufkin has a global network of more than 110 service centers and nine manufacturing facilities. In addition, Lufkin’s three turbomachinery production facilities and seven service centers manufacture industrial gears and engineered bearings for turbine applications, predominately for energy-related industrial applications.

The transaction, which is unanimously recommended by Lufkin’s board of directors, is expected to close in the second half of 2013 subject to Lufkin shareholders’ approval, regulatory approvals and customary closing conditions.

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