GE makes US$1.3bn proposition to UK's Wellstream
Proposition is part of GE's strategy to expand in FPSO market
GE announced its intention to make an offer for 100% of subsea oil and gas pipeline specialist UK based Wellstream Holdings for US$1.3 billion.
The transaction, which the board of Wellstream intends to unanimously recommend to Wellstream’s shareholders, is expected to complete in the first quarter of 2011, subject to acceptance by shareholders and customary closing conditions.
With double-digit growth expected in deepwater spending annually for the next five years, the addition of Wellstream will broaden GE Oil & Gas’ extensive subsea production systems equipment and service capabilities, said GE in a statement. It also will enhance GE’s ability to capitalise on growth in Brazil, Africa and Asia, the statement added.
The proposed acquisition is part of GE's growth strategy to invest in its high-technology industrial businesses, enhance product competitiveness and expand its presence in fast-growing emerging markets. It also aligns with GE’s plans to capitalise on complementary and financially attractive acquisitions and partnership opportunities.
By acquiring Wellstream, a high-tech player in the flexible pipeline segment within the subsea industry, GE will further extend its reach into the important floating production, storage and offloading offshore segment.
Claudi Santiago, president and CEO, GE Oil & Gas said: “Wellstream is an excellent strategic fit with GE’s Oil & Gas business and represents an important win for customers, GE, and for Wellstream’s shareholders and employees.
Wellstream’s flexible riser and flowline products will extend our subsea solutions portfolio, providing customers – including those in Brazil, Africa and Asia – with the reliable technology and services needed to tackle their toughest deepwater challenges and to optimise the efficient production of oil and gas.”
Wellstream has a strong research and development focus and worldwide track-record of successful completion of complex flexible pipe projects, according to GE. Key products include dynamic flexible risers, static flowlines, jumpers and fluid transfer lines for deep and ultra-deepwater dynamic environments.
Wellstream operates two manufacturing facilities in Newcastle, UK, and Niterói, Brazil, employing approximately 850 qualified engineers and staff.
For the year ended 31 December 2009, Wellstream reported revenues from continuing operations of $602 million. Wellstream is reported to have a sales backlog of $398 million as of 16 November 2010.
The proposed acquisition would also broaden GE’s presence and continued investment in Brazil, where extensive pre-salt oil field discoveries have opened up further opportunities for subsea exploration and production.
“Brazil currently generates a substantial portion of Wellstream’s revenues, supported from its new Niterói manufacturing facility,“ Santiago said. “Brazil is a key region for GE and the proposed acquisition of Wellstream, along with the expansion of our Jandira, Sao Paulo Oil & Gas plant and the planned 2012 opening of a new $100 million investment GE Global Research Center in Rio de Janeiro, demonstrates our long-term commitment to this fast-growing region.
“The deal is at an attractive point in the industrial investment cycle and is the latest in a series of strategic acquisitions over the last decade that have helped GE Oil & Gas expand its portfolio across all segments of the oil and gas industry and deliver consistent growth and profitability,” Santiago said. “As with the successful integrations of VetcoGray and Hydril, I am confident that Wellstream also presents tremendous opportunities across our global customer base and provides for long-term, sustainable GE growth in the subsea industry.”
John Kennedy, chairman of Wellstream, said: “This is an attractive offer which, together with the special dividend, allows shareholders to realise their investment in cash at a price which reflects both our progress since Wellstream’s IPO in 2007 and the potential for further growth. Since IPO, we have invested across our business, increasing production capacity significantly and building strategic market positions. Wellstream will complement GE’s impressive capabilities and the transaction will benefit customers, employees and shareholders alike. The board intends to unanimously recommend that Wellstream’s shareholders accept the offer.”
GE Energy Latin American CEO, Rafael Santana, added: “Following our recent $3 billion deal to acquire Dresser, Inc., a global energy infrastructure technology and service provider, the proposed acquisition of Wellstream continues the strategic expansion of GE’s $40 billion Energy portfolio and reflects GE’s commitment to Brazil and Latin America.”
Today’s announcement follows other GE Oil & Gas equipment orders of particular interest in Brazil, including: $120 million in subsea equipment contracts from South Korea’s Daewoo Shipbuilding & Marine Engineering for Petroserv and Odebrecht Oil & Gas-owned offshore Brazil drill-ships; and, a $160 million contract to supply gas turbine and compressor equipment to Petrobras for deployment in two floating production, storage and offloading units being deployed offshore.