General Electric Co. agreed to buy Lineage Power Holdings Inc. for $520 million to tap demand for electricity management from a surge in mobile computing, gaining customers from Verizon Wireless to Hewlett-Packard Co.
Lineage, owned by private-equity firm Gores Group LLC, offers equipment that converts power to direct current from alternating current as well as power-module and data-center systems in the $20 billion so-called micro-power industry, GE said today in a statement.
Buying Lineage expands GE’s offerings to compete with Emerson Electric Co., Siemens AG and ABB Ltd. as the manufacturers take advantage of global upgrades to the electric grid. Sales at Plano, Texas-based Lineage were about $450 million last year. GE said the purchase prices Lineage at eight times its market valuation including net debt.
“We have a broad portfolio of energy products and technology ranging from the power plant all the way through the grid and down to the building,” Dan Heintzelman, chief executive officer of the GE Energy Services unit, said in an interview. “This gives us strength now on the inside, in data centers, power conversion and software.”
CEO Jeffrey Immelt has spent about $5 billion in the past year on purchases tied to Fairfield, Connecticut-based GE’s Energy Services business, including Dresser Inc., two Chinese joint ventures and, this week, Remote Energy Monitoring Ltd. in the U.K.
Smartphone Application Surge
Lineage’s technology helps keep power uninterrupted for cloud computing, data storage and wireless networks that support Apple Inc. products such as the iPhone and iPad, Amazon Inc.’s Kindle and devices that use Google Inc.’s Android software. Applications downloaded to smartphones will surge by 60 percent a year to generate $35 billion by 2014, research firm IDC estimated last month.
“If your Blackberry goes down, right, it’s a problem, so you want to have reliable power,” GE Vice Chairman John Krenicki, who runs the energy infrastructure group of businesses, said on company-owned network CNBC today. “A lot of energy goes into these data centers.”
Gores Group formed Lineage when the Los Angeles-based firm purchased the power backup unit from Tyco Electronics Ltd. for $100 million in 2007 and hired current CEO Craig Witsoe to run the company. Lineage has more than 2,200 employees.
Tyco International Ltd. bought the unit as part of a purchase from then-Lucent Technologies Inc. in 2000 for $2.5 billion. Lucent was formed with the 1984 breakup of AT&T Corp., where some of the original technologies Lineage makes were invented.
“This business was born in Bell Labs,” Krenicki said on CNBC.
Deutsche Bank AG advised GE and Morgan Stanley & Co. advised Gores Group on the Lineage transaction, which should close in 2011’s first quarter, GE said.
GE Energy Infrastructure, of which Heintzelman’s division is a part, is the world’s biggest maker of power generation equipment and services. It provided about $40 billion of GE’s $157 billion in sales in 2009.
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