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GE snaps up Dresser for US$3 billion while $1.2 billion offer for Wellstream is rebuffed

|Includes: General Electric (GE)

GE (NYSE:GE) said Wednesday that it has signed a contract to acquire Dresser, a global energy infrastructure technology and service provider, in a $3 billion deal.

The acquisition is the latest in a series of transactions over the last 10 years that has helped grow the company's energy business. Past purchases include that of oil and gas company Nuovo Pignone, gas engines business Jenbacher, Bentley Nevada and  renewable energy group Enron Wind.

Dresser's portfolio, which includes technologies for gas engines, control and relief valves, measurement, and regulation and control solutions for gas and fuel distribution, will no doubt help GE broaden its energy offerings.

“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 percent of its total revenue is derived from aftermarket service offerings, and there is a lot of room for future expansion,” said vice chairman, president and CEO of GE Energy, John Krenicki.

The deal will also benefit Dresser, accelerating the expansion of its footprint globally, as 60% of its revenues already come from outside of North America.

Headquartered in Addison, Texas, Dresser operates in more than 100 countries, delivering compression, flow technology, measurement and distribution infrastructure and services to customers in more than 150 countries. The company had revenues of $2 billion and earnings of $318 million in 2009.

The deal, which is still subject to closing conditions, follows a series of announcements by GE’s energy business in the last few weeks. In September, GE announced a joint venture in China to grow in the wind market, and this month the company announced it purchased assets of Calnetix Power Solutions, which expands GE’s capabilities to recover waste heat from industrial processes for electricity generation. Late last week, the company also signed a $700 million contract with Saudi Electricity Company for a new power plant in Riyadh, Saudi Arabia.

GE is a diversified infrastructure, finance and media company that operates in more than 100 countries and employs about 300,000 people worldwide. GE Energy made $40 billion in revenues in 2009.

In a seperate announcement, General Electric said that UK-based oil and gas pipeline systems specialist Wellstream (WSM:LSE) rejected a 7.50 pound-per-share takeover offer.

The global infrastructure, media and financial services group said it was "disappointed" at Wellstream's decision, and could very well take no further action.

According to reports, Wellstream said it had received a number of preliminary approaches in September regarding a possible offer for the company, but did not specify any names.

However, Wellstream shares increased earlier in the week after the Sunday Times reported on Sunday that a GE subsidiary offered 8.00 pounds per share for the company. Wellstream closed down 2.4% at 7.61 pounds on the London Stock Exchange on Wednesday.

Wellstream is a British company that designs and manufactures flexible pipeline systems for the oil and gas industry. The company was acquired by Dresser Industries in 1995 and subsequently became part of Halliburton when it merged with Dresser in 1998. Halliburton then sold off Wellstream to beleaguered private equity firm Candover and a syndicate of investors for $136 million in 2003, which in turn listed the firm on the London Stock Exchange in April 2007.

The company said its order backlog is on the rise; as of August, its orders stood at more than £280m.

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