General Electric to acquire John Wood unit for $2.8b

New York:  General Electric Co agreed to buy the well-support division of John Wood Group Plc for about $2.8 billion (Dh10.3 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 yesterday. The business, which also helps extract gas from shale, had sales of $947 million and earnings of $166 million before interest, taxes, depreciation and amortisation last year.

GE had spent about $5 billion in the past five months on purchases tied to the energy segment, including those like Wellstream Holdings Plc in December to expand the oil and gas division.

GE chief executive officer Jeffrey Immelt is spending a discretionary cash pile of more than $20 billion annually, increasing the dividend last year and restarting acquisitions.

"This is a nice bolt-on deal for GE that adds product breadth in its oil and gas unit," said Joel Levington, who follows GE for Brookfield Investment Management in New York.

"GE's recent deals, which have focused mainly on fold-in transactions into the core infrastructure units is a reasonable strategic component to its capital allocation plans."

The purchase largely completes acquisitions at the oil and gas unit by giving it submersible electric pumps, an area where the Fairfield, Connecticut-based company expects growth and that help companies extract more from existing projects, vice-chairman John Krenicki said in an interview.

John Wood climbed 13 per cent to 648.5 pence in London trading as of 11.40am.

"If you can get a per cent or two more out of these giant brownfields," it can mean more from existing resources," Krenicki said.

The technology like that of the Wood unit has "changed the game," he said, pushing GE to pursue the purchase.

"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 Immelt looks to faster growing and emerging markets to boost revenue and earnings.

The 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 across the other portions of his businesses, which include the world's biggest provider of power-generation equipment and services including gas and wind turbines, water treatment and solar panels.

Energy acquisitions

GE Energy Infrastructure provided $37.5 billion of the parent company's $150 billion in sales last year.

The purchase, if completed, follows the acquisition of Wellstream Holdings Plc, the Hydril unit of Tenaris SA purchased in 2008, and Vetco Gray Incorporated in 2007.

Acquiring the unit, which has about 3,800 employees, is expected to bolster sales and earnings "significantly," GE said.

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.