GE to buy Lufkin Industries in $3.3B cash deal

The energy giant is paying a 38% premium for the manufacturer of oil well equipment.

By TheStreet Staff Apr 8, 2013 1:26PM

thestreet logoA General Electric Co. logo Fabrice Dimier, Bloomberg via Getty ImagesBy Philip van Doorn  

 

General Electric (GE) on Monday announced an agreement to purchase Lufkin Industries (LUFK) in a cash deal valued at $3.3 billion.

 

Lufkin's shareholders will receive $88.50 share, or a 38% increase over the target company's closing share price of $63.93 on Friday. The deal is expected to be completed in the second half of 2013.

 

General Electric's shares were down slightly in afternoon trading, to $22.88, while shares of Lufkin were up 38% to $88.24, which was hardly surprising, but was still slightly lower than the takeout price.

 

Lufkin is based in Lufkin, Tex., and manufactures artificial lift equipment that improves the efficiency of oil wells, and also makes gearboxes used for power transmission. The company's revenue totaled $1.281 billion in 2012, increasing from $932 million in 2011. The company's net earnings during 2012 were $81.9 million, or $2.45 a share, increasing from $70 million, or $2.14 a share, the previous year.

 

According to the companies' joint press release, Lufkin operates "a global network of more than 110 service centers and nine manufacturing facilities," employing 4,500 people in more than 40 countries.

 

GE's oil & gas segment had total revenue of $15.24 billion in 2012, increasing from $13.61 billion in 2011. The segment's 2012 profit was $1.92 billion, growing from $1.66 billion the previous year.

 

"The artificial lift segment is at the heart of critical changes that are helping producers maximize well potential-which translates into increased output at lower operational cost," said Daniel Heintzelman, CEO of GE's oil & gas segment. Heintzelman added that "Lufkin's world-class people, equipment and services fit perfectly in our portfolio and will enable us to offer a wide range of artificial lift solutions to our customers in this fast-growing artificial lift sector.

 

"In turbomachinery, Lufkin is already one of our suppliers for turbo gearing and specialty bearings products, and this acquisition allows us to further utilize their technologies and expertise for our customers," Heintzelman said.

 

GE has plenty of money to fuel acquisitions, $77 billion in cash and cash equivalents as of Dec. 31. Lufkin is the latest in a series of energy infrastructure deals for General Electric, following the acquisitions of Wellstream PLC in February 2011, John Wells Group in April 2011 and Dresser in September 2011.

 

GE is scheduled to announce its first-quarter results on April 19, with the consensus among analysts polled by Thomson Reuters being earnings of 35 cents a share, compared to 44 cents a share during the fourth quarter (see TheStreet), and 34 cents a share in the first quarter of 2012.

 

Shares of General Electric closed at $22.93 Friday, returning 10% this year, following a return of 21% during 2012. The shares trade for 12.4 times the consensus 2014 EPS estimate of $1.85. The consensus 2013 EPS estimate is $1.67.

 

Based on a quarterly dividend of 19 cents, GE's shares have a yield of 3.31%.

 

At the end of 2012, General Electric was authorized by its board of directors to repurchase roughly $14.9 billion worth of common shares. The company's share buybacks during 2012 came to $5.2 billion.

 

More from TheStreet.com

2Comments
Apr 8, 2013 4:47PM
avatar

Another loss for anyone who owns  ge the stock that never does anything. What a bunch of D bags f you ge. Look at th ge history what a TURD ! Not a real stock just a lame joke inho.

f  ge

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
265
265 rated 2
429
429 rated 3
612
612 rated 4
499
499 rated 5
525
525 rated 6
701
701 rated 7
533
533 rated 8
337
337 rated 9
131
131 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
COPCONOCOPHILLIPS9
TAT&T Inc9
DVNDEVON ENERGY CORPORATION9
EOGEOG RESOURCES Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.