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General Electric (GE) to Acquire Cameron Reciprocating Compression Unit

By: , dated January 20th, 2014

Shares of the General Electric Company (GE) closed down -0.62 or -2.28 percent on Friday on almost triple its daily volume. U.S. markets were closed on Monday morning in observance of Martin Luther King’s Birthday, however, GE announced this morning it would be buying Cameron International Corp.’s CAM reciprocating compression unit for $550 million.

The acquisition of the Cameron unit is for GE Oil & Gas’s Downstream Technology Solutions, one of the company’s fastest growing divisions. The addition of the unit will expand GE’s manufacturing and servicing capabilities in gas production, processing and distribution, as well as the company’s shale development technology.

Fairfield, Connecticut based General Electric is a U.S. based transnational conglomerate best known as a manufacturer of appliances. The company, founded by Thomas Edison in 1892 has expanded into aviation, consumer electronics, oil and gas production and exploration, electric motors, locomotives, software, lighting, healthcare, energy and finance among other businesses. GE’s 2012 revenue was in excess of $147 billion, with a worldwide workforce of 305,000.

Houston, Texas based Cameron International (CAM) is a global company providing pressure control and processing systems, in addition to project management and services for the oil and gas industries. Cameron employs 28,000 people worldwide.

The reciprocating compression unit being acquired by GE operates in 20 global locations and employs about 900 people. The unit generated about $355 million in sales for Cameron in 2012, providing reciprocating compression equipment and aftermarket services and parts for the oil and gas industry.

Reciprocating compressors have several applications in the industry including, gas transmission and storage, as well as gathering, lifting and injection of natural gas. Demand for high-speed reciprocating compressors has increased considerably with the extraction of oil and gas from shale deposits in the United States and Canada.

Lorenzo Simonelli, president and CEO of GE Oil & Gas said that, “This acquisition will benefit our employees, customers and GE shareholders alike, our increased strategic focus, the buoyant oil and gas sector and our track record in providing high-quality support to customers combined with Cameron’s Reciprocating Compression division will position us for accelerated growth.”

Richard Stegall, president of Cameron’s Reciprocating Compression unit, said that, “We are very excited at the prospect of joining GE Oil & Gas and the Downstream Technology Solutions business. Given our collective breadth of service offerings, the combination will greatly benefit both companies’ customers and employees. We have achieved good growth over recent years, and we anticipate that this trajectory will continue with the support of GE Oil & Gas.”

The acquisition will certainly enhance GE’s presence in the oil and gas field and will have some affect on the price of its stock. GE stock is currently trading at the high end of its five year trading range, with a PE of 17.87 and a dividend yield of +3.31 percent. With improving earnings, the stock continues to be a solid investment.

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Jay Hawk Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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