GE will acquire Lufkin Industries, a provider of artificial lift technologies for the oil and gas industry and a manufacturer of industrial gears, for approximately US$3.3 billion.
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.
Lufkin is expected to 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 optimisation 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 revolutionising 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 maximise 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 utilise 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."
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.
With synergies from GE Oil & Gas' global scale and 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.
The global artificial lift sector is expected to approach US$13 billion in 2013, according to Spears & Associates. Growth is being fueled by the development of unconventional shale plays and liquids-rich resource plays.
Automation also is an integral part of Lufkin's system-wide approach to artificial lift optimisation, 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 are currently 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.