GE Adds Another Piece To Its Subsea Business

General Electric (NYSE:GE) had to work a bit on this one, but the American conglomerate was finally able to close a deal to acquire Wellstream, a British manufacturer of flexible pipeline products used in subsea energy development projects. With this deal, GE further rounds out its energy services product portfolio, and positions itself in what is likely to be a major offshore market for many years to come. 

The Terms of the Deal
GE announced that it reached an agreement to acquire Wellstream for $1.3 billion in cash. The deal was based on a price of 780 pence for each share of Wellstream, and Wellstream's stock has moved up about 5% to 786.50 in trading. This is not a case, though, of rampant expectation of a rival bid - part of GE's deal for Wellstream also included a special six pence special dividend above and beyond the bid price. All in all, going back to late September and the time before the company publicly talked about receiving expressions of interest in a buyout, the stock is up about 29%.

Valuing this deal is a little tricky, as Wellstream's 2010 looks to be a down year in a more generally upward trend. On a normalized basis, it looks like GE is paying about 14-times Wellstream's EBITDA - double the current valuation of rival Technip (on a similarly normalized basis), and a pretty healthy multiple relative to U.S. subsea equipment companies like Cameron (NYSE:CAM), National Oilwell Varco (NYSE:NOV) and FMC Technologies (NYSE:FTI).


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