Feed Forward Blog: Acquisition Activity Heats Up

GE continues to bolster its presence in various manufacturing, production and energy sectors with the proposed acquisition of the Well Support Division of John Wood Group PLC. Meanwhile, Siemens, no doubt watching is neighboring central European rival ABB picking up companies, has put out word that it is now in the acquisition hunt with a huge war chest.

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GE Acquires Wood Group Division

GE announced that its Oil & Gas business has entered into an agreement to acquire the Well Support division of John Wood Group PLC (“Wood Group”) for approximately $2.8 billion. The transaction, which the Board of Wood Group intends to unanimously recommend to its shareholders, is expected to close later in 2011, subject to shareholders’ approval and customary closing conditions.

In 2010, the Well Support division recorded revenues of $947 million and EBITDA of $166 million (unaudited estimates), which reflected growth of 16% and 55% respectively over 2009. The division, which generated 13% average annual revenue growth over the past decade, is expected by GE to generate $1.1 billion in revenue and approximately $200 million of EBITDA in 2011. In addition, with synergies from GE Energy’s global scale and broad array of solutions, GE believes the business is well positioned for significant top and bottom line growth going forward.

John Krenicki, Vice Chairman and President and CEO of GE Energy added: “Enhanced oil recovery and unconventional hydrocarbon resource development are energy industry mega trends with huge growth potential. The Well Support Division and Wellstream acquisitions, when combined with Vetco Gray and Hydril, position GE to take full advantage of these trends. With the completion of these recent acquisitions, our drilling and production portfolio will be comprehensive and complete at scale to better serve our global customers and deliver double digit organic growth for our investors."

Siemens now in the hunt

Meanwhile according to this story in The Local, Siemens seems poised to enter the acquisition fray joining ABB and GE who have been hunting and pouncing for some time and Honeywell and Rockwell who have also been making strategic acquisitions.

“When we talk about larger acquisitions, we mean significant sums of up to several billion euros,” Chief Financial Officer Joe Kaeser said in an interview with the business daily.

He added that the company, Europe’s largest engineering group by sales, had reached a level of “management maturity” that enabled it to pursue significant takeovers.

The company will focus on an expansion of its power network segment as well as looking at new techniques for energy efficiency and automation. “This is where our focus will be – strategically and operationally, also in terms of takeovers and when it comes to research and development,” Kaeser said.

The new direction is a major shift from the company’s previous strategy, which was concentrated on restructuring, expanding margins and internal growth. It illustrates how companies in Europe and the United States are looking for ways to spend the cash they have accumulated since last year’s economic recovery.

The report said Siemens has about €15.6 billion in acquisition money to spend and a company source told the Financial Times Deutschland that its war chest was “filled to the brim.”

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