General Electric Expands Range of Motion in U.S. Energy Boom with Purchase of Lufkin

Michael Teague  |

Shares for Lufkin Industries (LUFK) soared in Monday trading as it was announced that the company would be purchased by General Electric (GE) for $3.3 billion, as part of GE’s increasing appetite for strategic presence in the oil market.

Lufkin is a manufacturer and supplier of products for energy infrastructure and industry whose role in shale drilling is centered primarily on its hydraulic pumping units and lift equipment that are responsible for bringing oil and gas from shale formations deep underground up to the surface.

GE’s offer translates to a value of $88.50 per share for the company, 38 percent greater than its closing price on Friday of $63.90. Subsequent to the announcement, Lufkin’s shares immediately spiked almost 38 percent, and closing with a gain of 37.59 percent, or $87.96 per share.

The deal, slated for finalization in the latter half of 2013, has been approved by Lufkin’s board of directors, and is seen as another notch in CEO Jeffrey Immelt’s plan to shift GE’s business away from finance and towards manufacturing.

Since at least 2010, General Electric has been on the hunt for oil and gas acquisitions, purchasing the oil drilling pipe-maker Wellstream Holding Plc in that year. The well-support division of John Wood Plc, a company involved in the making of electric submersible pump technology, was acquired in April of 2011.

Additionally, the company acquired a majority stake in Coverteam, a producer of electrification and automation equipment and systems, in 2011 as well. Coverteam’s importance to GE’s expansion into oil and gas must be seen in the context of the increasing use of electrification in natural gas storage, as well as transportation through pipelines.

Last fall, General Electric signed a deal with Petrobras, to provide the Brazilian oil giant with almost 400 wellhead systems worth just over $1 billion, and fills out the picture of a company that is trying to position itself at all profitable junctions of the coming oil and natural gas boom in the United States and globally.

GE’s shares closed on Monday up 0.83 percent to $23.12.

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