GE buying oil services company - Yahoo! News

NEW HAVEN, Conn. - Citing strong global demand for energy, General Electric Co. said Monday it agreed to buy oil services company Vetco Gray for $1.9 billion from a group of private equity funds.
Vetco Gray provides drilling, completion and production equipment for oil and gas fields. Its owners include the private equity funds Candover Partners Ltd., 3i Group PLC & JP Morgan Partners LLC.
The business, which is forecast to generate over $1.6 billion of sales in 2006, has 5,000 employees with key centers in Houston, Britain, Norway and Singapore.
GE's current oil and gas business has about 5,000 employees, so the acquisition doubles its work force in the business. GE's oil and gas business had about $3.6 billion in revenue in 2005, company officials said.
GE expects demand for energy will increase by another 50 percent by 2025, mostly driven by emerging economies, said GE spokesman Peter O'Toole.
"We just don't see it abating anywhere," O'Toole said.
Vetco sells equipment good for deep water drilling, which is increasingly important as rising demand and prices make such drilling more attractive, said Chris Kotowicz, an analyst with AG Edwards in St. Louis.
"I think it's a positive step in addressing an end market that is going to be important on a global basis for the foreseeable future," Kotowicz said. "The price doesn't look all that bad."
The acquisition is the latest move by GE chief executive Jeff Immelt to buy faster-growing businesses and exit slower growth businesses. GE expects this year for the first time to generate more than half of its revenue outside the U.S.
"Oil and gas is a central part of where we are going to get that," O'Toole said. "We wanted to have a broader portfolio of products."
Bank of America analyst Robert McCarthy said Vetco is a leading supplier of products and services for oil and gas drilling and production. The acquisition gives GE a "solid global presence," he said in a research note.
"We believe that GE had been trying to acquire Vetco Gray for a while and it is not totally unexpected," McCarthy said in his note. "This transaction is consistent with their oil and gas expansion strategy and provides real synergies to GE's current portfolio."
Completion of the transaction is subject to governmental and regulatory approval and is expected in early 2007, GE said in a statement.
"This acquisition enables GE to seize faster growth in a rapidly expanding global business," said Claudi Santiago, chief executive of GE Oil & Gas. "Vetco Gray expands the portfolio of products, services and solutions available to one of the world's most dynamic industries."
GE, based in Fairfield, is a diversified conglomerate with interests in industrial operations, finance and media including the NBC television network.
GE shares slipped a penny to close at $37.55 Monday on the
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