GE has emerged from three years of relative inactivity in the take-over market with around $25 to $30 billion to spend on share buy-backs and acquisitions, and has immediately spent $3 billion on Dresser Masoneilan. The spending freeze was said to have resulted from cash constraints imposed by the GE finance businesses during the credit squeeze. The declared objective is now to concentrate on existing business areas, and "infrastructure" is the stated broad theme, presumably meaning expansion of its $40-billion energy technology portfolio. The first acquisition target was Wellstream, based in Newcastle, UK, and a manufacturer of oil and gas industry flexible pipeline products, typically as used in deepwater exploration projects. Wellstream is a major supplier to Petrobras in Brazil. The second GE bid amounted to 750 pence a share, valuing Wellstream at GBP750 million, and topping a 700p per share bid by National Oilwell Varco (NOV), but this was then rejected by the management. So GE walked away from that opportunity early in October, leaving the market expecting another bid for Wellstream from NOV, Cameron International or Saipem of Italy, but nothing has emerged so far.
Dresser as a second choice?
GE had another target in view, with the $3-billion bid for Dresser Inc, "a supplier of high technology compression gas engines, flow technologies and measurement and distribution solutions." Dresser, which includes Dresser Masoneilan valves and controls, had revenues of $2 billion and earnings of $318 million in 2009.
"Dresser is a great fit for the GE business model," said John Krenicki, vice chairman of GE and president and CEO of GE Energy. "Dresser's technology complements our existing gas engine portfolio and adds offerings complementary to those of GE in the $45Bn flow technology industry, including product offerings in the highly engineered valve segment. Eighty-five percent of Dresser's revenue is from energy customers, and it has developed a large installed base of equipment, which is a big reason why 40% of its total revenue is derived from aftermarket service offerings, and there is a lot of room for future expansion."
Krenicki added, "Dresser has a global franchise and brand with 60% of revenues outside of North America, which will be accelerated by GE's global footprint. Through the acquisition, we will bring to bear our focus on research and development to Dresser's highly engineered custom solutions and create an opportunity for Dresser's 6300 talented employees to dramatically expand their businesses."
"Our track record integrating previous acquisitions such as Nuovo Pignone, (oil & gas), Jenbacher (gas engines), Bently Nevada (conditioning and monitoring - but they mean condition monitoring - Ed) and Enron Wind (renewable energy), gives us great confidence to build upon as we move forward with Dresser," explained Krenicki. "Our team is committed to technology leadership, globalization and operating discipline.
"GE Jenbacher's expertise in clean, fuel-flexible, high-efficiency, power-generation engines, combined with Dresser’s expertise in durable, low-emissions, fuel-flexibility rich-burn mechanical drive engines, will help deliver a wide-range of enhanced gas-engine technology that can be applied to the small-scale compression segment for customers in the oil and gas sector, and provide solutions to petrochemical, mining, manufacturing and power-generation customers worldwide.
"Dresser also will further the development of GE Energy's monitoring, diagnostics and performance optimization offerings. Dresser's pressure relief and control valve technologies will be complemented by GE's domain expertise, which will create opportunities to bring additional technology and applications to Dresser's offerings. GE plans to build out solutions it offers to help customers effectively manage the pressure and relief flows in pipelines, processing plants and power generation facilities."
So there are some comments about Masoneilan valves in all that, but do GE appreciate the real value of this capability in their overall process offering?
Other news from GE
On September 27, GE announced a joint venture in China to grow business in the world's largest wind market. On October 1, the company announced the completion of the purchase of the assets of Calnetix Power Solutions, which expands GE's capabilities to recover waste heat from industrial processes for electricity generation and will also complement GE'-s gas engine business. On October 4, GE signed a $700-million contract with the Saudi Electricity Company for a new, high-efficiency power plant in Saudi Arabia.