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GE (NYSE: GE), Fairfield, CT, has agreed to acquire Lufkin Industries Inc. (NASDAQ: LUFK), Lufkin, TX, a provider of artificial lift technologies for the oil and gas industry and a manufacturer of industrial gears, for $3.3 billion.
The purchase price represents a multiple of about 13.5x 2013 EBITDA. In 2012, Lufkin posted sales of $1.3 billion, which reflected growth of 37 percent.
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, Lufkin will broaden GE Oil & Gas’ artificial lift capabilities beyond electric submersible pumps 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 electric submersible pumps category of artificial lift is the only lift segment in which Lufkin does not currently compete.
“Advanced technologies, combined with new drilling practices, are revolutionizing the oil and gas industry,” said Daniel C. Heintzelman, president and CEO, GE Oil & Gas. “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.
"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.
With 4,500 employees in more than 40 countries, Lufkin manufactures and services a broad portfolio of artificial lift equipment through 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 is expected to close in the second half of 2013.