GE to Acquire Lufkin Industries

  GE to Acquire Lufkin Industries

  *Accelerates GE’s Growth in Artificial Lift With Solutions for a Wider
    Variety of Well Types and Technology for Production Automation and
    Optimization
  *Strengthens GE’s Turbomachinery Supply Chain With Lufkin’s Industrial
    Gears and Bearings
  *Builds on GE’s 2011 Acquisition of the Well Support Division of the John
    Wood Group PLC

Business Wire

HOUSTON -- April 8, 2013

GE (NYSE: GE) and Lufkin Industries Inc. (NASDAQ: LUFK) announced today a
joint agreement whereby GE will acquire Lufkin Industries Inc., a leading
provider of artificial lift technologies for the oil and gas industry and a
manufacturer of industrial gears, for approximately $3.3 billion. Lufkin
shareholders will receive $88.50 per share in cash for each of their Lufkin
shares.

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 (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.

“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’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.”

“GE represents an excellent new home for Lufkin’s technologies, services and
our highly skilled and experienced employees,” said John F. "Jay" Glick,
Lufkin’s president and CEO. “The global scale that GE offers, combined with
its deep service offerings and network of research labs, will create new
opportunities for our customers and employees around the world. This
transaction allows us to realize our strategic objectives for expanding both
our portfolio and our global platform and will allow us to reach global
customers much faster and more effectively than we could have done as a
standalone company. We believe the financial terms of the transaction
represent full and fair value for Lufkin’s shareholders.”

Headquartered in Lufkin, Texas, with approximately 4,500 employees in more
than 40 countries, Lufkin manufactures and services a broad portfolio of
industry-leading 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 that are designed to
produce higher power levels and speeds and better efficiencies in 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.

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.With synergies from GE Oil & Gas’
global scale and broad array of solutions, GE believes the business is well
positioned for significant top and bottom line growth.

Oil & Gas is GE’s fastest-growing business, and with the addition of Lufkin’s
artificial lift products and automation and optimization solutions, GE can
provide global exploration and production customers with a complete portfolio
of offerings that address a wider variety of well types at all stages of the
production lifecycle.

GE’s portfolio of turbomachinery equipment is used in mechanical-drive,
compression and power-generation applications such as liquefying natural gas,
moving hydrocarbons through pipelines or generating power via gas turbines at
a production or industrial site. Lufkin’s suite of gears and bearings will
complement GE’s existing product line and are currently in use on GE’s
compressor and gas turbines. Lufkin will continue to sell these to the open
market as it does today.

Artificial Lift’s Importance in Oil & Gas Extraction

The global artificial lift sector is expected to approach $13 billion in 2013,
according to Spears & Associates. Growth is being fueled by the development of
unconventional shale plays and liquids-rich resource plays. For example, in
North America, an increased pursuit of oil has driven demand for the rod lift
systems manufactured by Lufkin. In 2010, rod lift systems represented about 19
percent of the artificial lift sector (as measured by dollars of equipment
sold per year). By 2012, rod lift had grown to 31 percent of the sector,
according to Spears.

Lufkin Industries, Inc. is an industry leader in rod lift solutions, and its
beam pump units are a universal symbol of oilfield production. Other
artificial lift systems are in demand as well including progressive cavity
pumps for heavy oil and gas lift for unconventional shale and offshore
production. Lufkin also is pursing global opportunities and recently opened a
large manufacturing facility in Romania to service Eastern Hemisphere markets.

Automation also is an integral part of Lufkin’s system-wide approach to
artificial lift optimization, which helps reduce the overall cost of
production in mature fields. It’s one of Lufkin’s fastest growing segments,
driven by organic growth and three strategic acquisitions completed over the
last 18 months. Lufkin’s expanded product line allows it to offer a broad
suite of automation products, which today are installed on more than 150,000
wells around the globe. The automation portfolio of Lufkin contains the
building blocks that will help drive smart technologies to develop an
artificial lift “industrial internet” with “predict-and-prevent” service and
maintenance issues through a connected network of technology, data and
experts.

GE Oil & Gas has a proven record of acquiring, integrating and growing
companies, as demonstrated by $11 billion in acquisitions since 2007,
including the recent addition of Wellstream Holdings, Dresser Inc., and Well
Support (artificial lift).

Simmons & Co. provided investment banking counsel and Bracewell & Giuliani
provided legal counsel to Lufkin. Goldman Sachs and Deutsche Bank provided
financial advice to GE, and Weil, Gotshal & Manges was GE’s legal advisor.

About GE Oil & Gas

GE Oil & Gas is a world leader in advanced technologies and services with
37,000 employees in more than 100 countries supporting customers across the
industry—from extraction to transportation to end use. Making the environment,
health and safety, quality and integrity our highest priorities is The Way We
Work. Our technologies and services include: surface and subsea drilling and
production, monitoring and diagnostics, measurement and controls, large-scale
LNG, pipeline compression and inspection, well site and industrial power
generation, technologies for the refining and petrochemical industries, and
modular CNG and LNG units for transportation sectors. Through our customized
service solutions, training programs and technologies, GE Oil & Gas partners
with customers to maximize their efficiency, productivity and equipment
reliability; develop their next generation workforce; and fully benefit from
the megatrends of natural gas, the growth of subsea and hard-to-reach reserves
and the revolution in asset health management. Follow GE Oil & Gas on Twitter
@GE_OilandGas.

About Lufkin

Lufkin Industries, Inc. sells and services oilfield pumping units, well
automation systems, gas lift and plunger lift systems, progressing cavity
pumps, well completion products, foundry castings and power transmission
products throughout the world. Lufkin has a broad range of technologies
required to design, manufacture and market its products.

IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC

Lufkin Industries, Inc. plans to file with the SEC and mail to its
shareholders a Proxy Statement in connection with the transaction. The Proxy
Statement will contain important information about General Electric Company,
Lufkin Industries, Inc., the transaction and related matters. INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT CAREFULLY WHEN IT IS
AVAILABLE.

Investors and security holders will be able to obtain free copies of the Proxy
Statement and other documents filed with the SEC by Lufkin Industries, Inc.
through the web site maintained by the SEC at www.sec.gov or by phone, email
or written request by contacting Lufkin Industries, Inc. at the following:

Address: 601 South Raguet, Lufkin, TX 75904-3951
Phone: (936) 631-2749
Email: cboone@lufkin.com

PARTICIPANTS IN THE SOLICITATION

Lufkin Industries, Inc. and its directors, executive officers and certain
other members of management and employees of Lufkin Industries, Inc. may be
deemed “participants” in the solicitation of proxies from shareholders of
Lufkin Industries, Inc. in favor of the proposed merger. Information regarding
the persons who may, under the rules of the SEC, be considered participants in
the solicitation of the shareholders of the Company in connection with the
proposed merger, and their direct or indirect interests, by security holdings
or otherwise, which may be different from those of Lufkin Industries, Inc.’s
shareholders generally, will be set forth in the Proxy Statement and the other
relevant documents to be filed with the SEC. You can find information about
certain of Lufkin Industries, Inc.’s executive officers and its directors in
its Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

Statements in this press release regarding the proposed transaction, the
expected timetable for completing the proposed transaction, future financial
and operating results, benefits and synergies of the proposed transaction,
future opportunities for the combined company and any other statements about
the future expectations, beliefs, goals, plans or prospects of the management
of General Electric Company or Lufkin Industries, Inc. constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Any statements that are not statements of
historical fact (including statements containing the words “believes,”
“plans,” “anticipates,” “expects,” “estimates” and similar expressions) should
also be considered to be forward-looking statements. There are a number of
important factors that could cause actual results or events to differ
materially from those indicated by such forward-looking statements, including:
the ability to consummate the proposed transaction; the ability to obtain
requisite regulatory and shareholder approval and the satisfaction of the
other conditions to the consummation of the proposed transaction; the
potential impact of the announcement or consummation of the proposed
transaction on relationships, including with employees, suppliers, customers
and competitors; and the other factors and financial, operational and legal
risks or uncertainties described in General Electric Company’s and Lufkin
Industries, Inc.’s Annual Reports on Form 10-K for the year ended December 31,
2012. General Electric Company and Lufkin Industries, Inc. disclaim any
intention or obligation to update any forward-looking statements as a result
of developments occurring after the date of this document except as required
by law.

Contact:

Sean Gannon, +1-212-587-5059
GE Oil & Gas
sean.gannon@ge.com
or
GE Oil & Gas
Fabio Pianini, +39-055-423-8872
fabio.pianini@ge.com
or
GE Corporate Financial Communications
Seth Martin, +1-203-572-3567
seth.martin@ge.com
or
Trevor Schauenberg, +1-203-373-2424
VP Investor Communications
trevor.a.schauenberg@ge.com
or
Lufkin Industries Contacts
Chris Boone, +1-936-631-2749
Chief Financial Officer
cboone@lufkin.com
or
Dennard-Lascar Associates
Anne Pearson, +1-210-408-6321
apearson@dennardlascar.com
 
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