London: General Electric Co has agreed to buy British oil drilling pipemaker Wellstream Holdings Plc for £800 million ($1.3 billion), as GE continues its push into the offshore oil services industry.
The deal is the latest in a series of GE buys in the oil services sector in recent years and shows that, despite the BP oil spill in the Gulf of Mexico this summer, the industry expects deep water water drilling to continue apace.
The acquisition would also give GE a strong footing in Brazil, where Wellstream has a manufacturing facility.
Brazil has made a series of multi-billion barrels oil discoveries in recent years in very deep water -- traditionally high cost for oil producers and high opportunity for equipment makers -- and Brasilia encourages the use of locally produced materials.
GE and Wellstream said in a joint statement on Monday that GE would pay Wellstream investors 780 pence in cash plus a special dividend of 6p, per Wellstream share, up from a bid of 750 pence/share tabled in September that Wellstream rebuffed.
Wellstream is one of only three main manufacturers of flexibles “riser” pipes, which connect driling rigs to well-heads on the sea floor.
Its two main rivals are France’s Technip and Italy’s Prysmian, although other companies manufacture rigid risers, a rival technology.
Shares of Wellstream traded up 5.0% at 784.5 pence at 02:15 pm, suggesting investors did not expect a rival bid to emerge.
Wellstream said in September it had received a number of approaches.
Energy services has been one of GE’s fastest growing divisions, partly by acquisition.
In October, GE reached a $3 billion deal to buy Dresser Inc , a maker of gas engines used to power oil and natural gas production equipment.
Rivals have also been busy snapping up smaller players.
On Monday, UK oil field services provider Wood Group said it had agreed to acquire unlisted Aberdeen-based rival PSN for $955 million, including $325 million of debt, the latest in a long line of acquisitions by Wood Group.
While such consolidation allows companies to extract cost savings, analysts say an often bigger driver is the fact the typically big oil companies which operate in deep water offshore drilling, prefer to deal with larger service providers who offer a broad range of services.
Wellstream was advised by investment banks Credit Suisse and Rothschild, while GE was advised by Goldman Sachs.