General Electric Co. ‘s agreement today to buy Wellstream Holdings Plc markets its acquisitions of natural gas and oil exploration equipment manufacturers to $ 4.3 billion over the past two months as Chief Executive Officer Jeffrey Immelt taps emerging market growth and energy demand.
GE’s purchase, valued at 800 million pounds ($ 1.3 billion) and offering a variety of sales and profits in line with industry averages, following the company agreed to buy Dresser Inc. for $ 3 billion in October.
Wellstream expands GE’s operations in Brazil, where Exxon Mobil Corp., BG Group Plc and its state-controlled Petroleo Brasileiro SA may need to spend more on the flexibility of the UK-based company pipes and risers in increasing energy production . Libra and the deepwater Tupi field, discovered in the past three years, together contain more than 20 billion barrels of oil.
“Subsea growth will come from Brazil,” Claudi Santiago, CEO of GE Oil & Gas, said in a telephone interview. “Brazil is one of many reasons” buy Wellstream sense, he said.
The purchase probably reflects the acceleration in the offshore oil and gas investments worldwide, Nicholas Heymann, an analyst at Sterne Agee & Leach Inc. in New York, wrote in a note to investors today.
“Since 2005, the global deepwater fleet doubled, and we believe that further investment deepwater field will be needed if the global demand for energy continues,” says Heymann, who has a “neutral” rating on the stock. “Importantly, Wellstream has little exposure Gulf of Mexico, a region where development has slowed significantly.”
Brazil Operation
Buy Wellstream supports Immelt strategy to build industrial business of GE, while shrinking the unit as a source of financial revenue and profit. Immelt said in October that GE approximately $ 20 billion in discretionary money to spend when he unlocks a war chest amassed more than two years had.
GE’s offer is about 2.1 times the oil and gas pipeline maker annual sales, in line with the median of 30 deals in the past five years.
The deal would pay Wellstream 13.2 times earnings before interest, taxes, depreciation and amortization, compared with 13.6 in the median of 26 acquisitions. Robbins & Myers Inc. paid 15.6 times EBITDA for T-3 Energy Services Inc. in October, Bloomberg data show.
The acquisition will be added to the GE Oil & Gas unit, which generated sales 7.7 billion U.S. dollars last year.
The oil and gas unit is part of GE Energy Infrastructure segment, a company Immelt has said he wants to expand. Energy infrastructure 37 billion U.S. dollars of Fairfield, Connecticut-based GE’s 157 billion U.S. dollars in 2009 sales.
Wellstream Sales
Wellstream, based in Newcastle Upon Tyne, England, a 2009 turnover of 386.1 million pounds, with Brazil reported accounting for more than half of that income, as reported by Bloomberg.
GE said in November it would spend 500 million U.S. dollars in energy, transportation and health to expand production in Brazil, while adding the fifth global research center.
With Dresser, GE adds industrial valves and pumps to challenge companies like Tyco International Ltd., Flowserve Corp. and Emerson Electric Co. Other unit of energy takeovers this year, the waste-heat generating companies are closely held Calnetix Inc. recorded a non undisclosed amount.
Wellstream shares rose 43 pence, or 5.8 percent, to 790 pence in London trading today. The company stock has gained 49 percent this year, higher than the average of 32 percent among his peers, according to Bloomberg data.
GE’s revised offer is 29 percent above the closing price on the Wellstream September 20, the day before the British company said it had received approaches.
GE fell 10 cents to $ 17.62 at 4:15 pm in New York Stock Exchange composite trading. The shares have gained 16 percent this year.
source:bloomberg
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