GE to Buy Lufkin Industries in $3.3B Cash Deal (Update 4)

Updated from 1:38 p.m. ET, with comments from Jim Cramer and Credit Suisse analyst Julian Mitchell, market close information, expectations for GE's first-quarter results, as well as GE's updated stock valuation and performance.

NEW YORK ( TheStreet) -- General Electric ( GE) on Monday announced an agreement to purchase Lufkin Industries ( LUFK) in a cash deal valued at $3.3 billion.

Lufkin's shareholders will receive $88.50 share, or a 38% premium over the target company's closing share price of $63.93 on Friday. The deal is expected to be completed in the second half of 2013.

General Electric's shares rose 1% to close at $23.12. Shares of Lufkin rose nearly 38% to close at $87.96, which was hardly surprising, but was still slightly lower than the takeout price.

Lufkin is based in Lufkin, Texas, and manufactures artificial lift equipment that improves the efficiency of oil wells, and also makes gearboxes used for power transmission. The company's revenue totaled $1.281 billion in 2012, increasing from $932 million in 2011. The company's net earnings during 2012 were $81.9 million, or $2.45 a share, increasing from $70 million, or $2.14 a share, the previous year.

According to the companies' joint press release, Lufkin operates "a global network of more than 110 service centers and nine manufacturing facilities," employing 4,500 people in more than 40 countries.

GE's oil & gas segment had total revenue of $15.24 billion in 2012, increasing from $13.61 billion in 2011. The segment's 2012 profit was $1.92 billion, growing from $1.66 billion the previous year.

"The artificial lift segment is at the heart of critical changes that are helping producers maximize well potential -- which translates into increased output at lower operational cost," said Daniel Heintzelman, CEO of GE's oil & gas segment. Heintzelman added that "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 utilize their technologies and expertise for our customers," Heintzelman said.

GE has plenty of money to fuel acquisitions, $77 billion in cash and cash equivalents as of Dec. 31. Lufkin is the latest in a series of energy infrastructure deals for General Electric, following the acquisitions of Wellstream PLC in February 2011, John Wells Group in April 2011 and Dresser in September 2011.

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