General Electric Is to Purchase John Wood Extraction Unit for $2.8 Billion
Stock Chart for John Wood Group PLC (WG/)
General Electric Co. agreed to buy the well-support division of John Wood Group Plc for about $2.8 billion, adding equipment that helps extract more oil and gas from mature fields to round out its offerings.
The transaction may close later this year, with the approval of John Wood holders, GE said in a statement today. The business, which also helps extract gas from shale, had sales of $947 million and earnings of $166 million before interest, taxes, depreciation and amortization last year.
GE has spent about $5 billion in the past five months on purchases tied to the energy segment, including those like Wellstream Holdings Plc to expand the oil and gas division. The purchase largely completes acquisitions at the unit by giving it submersible pumps, an area where the Fairfield, Connecticut- based company expects growth, Vice Chairman John Krenicki said in an interview.
“If you can get a percent or two more out of these giant brownfields,” it can mean more from existing resources, Krenicki said.
The key technology is pumps, such as the ones made by the division, which have “changed the game,” he said. “We had an opportunity and we jumped on it.”
GE Oil & Gas more than doubled revenue in five years to $7.6 billion last year as Chief Executive Officer Jeffrey Immelt looks to faster growing and emerging markets to boost revenue and earnings.
Wood Group plans to return $1.7 billion in cash to shareholders, a regulatory filing said.
Krenicki, who oversees the GE Energy businesses, said the company plans to “stick to our knitting” in acquisitions, adding so-called bolt-on acquisitions in the $1 billion to $3 billion range.
The purchase today, if completed, follows the acquisition of Wellstream Holdings Plc, the Hydril unit of Tenaris SA purchased in 2008, and Vetco Gray Inc. in 2007.
GE Chief Executive Officer Jeffrey Immelt is spending a discretionary cash pile of more than $20 billion annually, increasing the dividend last year, adding buybacks and restarting acquisitions including October’s $3 billion purchase of Dresser Inc.
Acquiring the unit, which has about 3,800 employees, is expected to bolster sales and earnings “significantly,” GE said in the statement.
John Wood, based in Aberdeen, Scotland, bought PSN Ltd. in December to create the world’s leading brownfield production- services provider. Selling the support unit would help the company pay down debt, Todd Scholl, an analyst at RBC Capital Markets in London, said Feb. 3.
GE and Wood Group have agreed to discuss an arrangement within the gas-turbine sector, a Wood statement said. If an agreement isn’t reached in 90 days or by the time the acquisition closes, GE will pay Wood Group $50 million.
GE Energy Infrastructure provided $37.5 billion of the parent company’s $150 billion in sales last year.
Last month, GE Energy bought Lineage Power Holdings Inc. to tap demand for electricity management from a surge in mobile computing as it expands alternative-energy offerings including smart grid, wind and solar.
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