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GE expands presence in energy industry with new acquisition

While best known for being the largest maker of jet engines and electric turbines in the world, GE Energy has been making a new name for itself by acquiring companies that focus on oil and gas production. Since 2007, it's estimated that GE has paid out some $11 billion to boost its presence in the oil and gas industry, and with its recent acquisition of Lufkin Industries, it appears as if GE wants to become a bigger player in the growing energy market.

The acquisition of Lufkin, which is a world leader in production of oilfield equipment, comes with a hefty $3.3 billion price tag which includes all of Lufkin's debt. The offer made by GE was considerably higher than previously predicted by business experts who say that GE is paying a 38 percent premium on Lufkin's shares. The increased offer was the likely reason for shares in Lufkin and GE to soar considerably this week.

Lufkin's expertise in oil drilling technologies, combined with recent acquisitions of companies that specialize in oil and gas production, GE officials hope to reshape the company as we know it while helping producers maximize well potential. At present time, oil and gas account for 10 percent of the company's total revenue; and with profits quickly growing, it appears as if more buyouts could be in GE's future.

Business acquisitions such as this can be an incredibly good idea for companies that are focused on driving business forward. If a company finds itself in a very limited market, they could start to see profits plummet faster than they can bring in revenue. But when a company decides to branch out into other industries, it can greatly increase its potential in the long run.

Source: CNBC, "GE to Buy Oil & Gas Giant Lufkin for $3.38 Billion," Reuters News, April 8, 2013