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GE Buying Vetco Gray for $1.9B, Grows Oil Patch Position

GE said Monday it has agreed to acquire Houston-based oilfield equipment provider Vetco Gray for $1.9 billion, which would grow its oilfield services business by nearly half. The company is a subsidiary of Vetco International, which is owned by private equity firms Candover, 3i and JP Morgan Partners.

Vetco Gray is a leading supplier of drilling, completion and production equipment for on- and offshore oil and gas fields. The business, which was expected to generate more than $1.6 billion of sales in 2006, employs 5,000 people in more than 30 countries, with key centers in Houston; Aberdeen, Scotland; Stavanger and Oslo, Norway; and Singapore. Major products include flow control valves (known as Christmas trees), control systems, wellheads, manifolds, risers and associated aftermarket services.

London-based Vetco Gray's sales are equal to nearly half of GE Oil & Gas' current annual revenues. With 5,000 employees in more than 30 countries, the addition of Vetco Gray also will double the headcount at GE Oil & Gas.

"This acquisition enables GE to seize faster growth in a rapidly expanding global business," said GE Oil & Gas CEO Claudi Santiago.

"The combination of GE's recognized technical expertise and financial resources and Vetco Gray's industry know-how and domain knowledge will allow the business and its employees to continue to prosper as it meets our customers' most difficult challenges," said Vetco International CEO Peter Goode.

Analyst Dan Pickering of Pickering Energy Partners of Houston said the deal was positive for the oil service sector, suggesting that there is long-term confidence in the energy industry segment. GE stepping into the sector when commodity prices are down and oilfield services has lost some of its pricing power should boost investor confidence, Pickering noted in a research comment.

Vetco competitors include Cameron International Corp. and FMC Technologies Inc. With this acquisition GE will be the owner of a leading supplier of drilling, well-completion and production equipment. The company will be positioned to become a bigger oilfield services player, Santiago said.

Closing, which is subject to conditions including the receipt of governmental, regulatory and other approvals, is expected early this year. Upon completion of the transaction, Candover, 3i and JP Morgan Partners will continue to own Vetco Aibel, which designs, engineers, constructs and maintains oil and gas production facilities, process systems and related products.

GE Oil & Gas is based in Florence, Italy and offers solutions for oil and gas production, LNG, transportation, storage, refineries and petrochemicals, as well as pipeline integrity solutions.

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