General Electric Co.'s (GE) oil-and-gas unit placed another big bet on deep-water oil exploration, agreeing to pay $1.3 billion for the U.K.'s Wellstream Holdings PLC (WSM.LN).
"We believe the future of the industry and the growth of the industry more and more will come from subsea and deep-water projects," which is Wellstream's speciality, Claudio Santiago, president and chief executive of GE Oil and Gas, said in an interview Monday.
The U.S. conglomerate is targeting $15 billion in oil-and-gas revenue, about double last year's level, by 2015.
Wellstream's board rejected a bid from GE in October, but unanimously recommended the latest offer after the U.S. company raised its price.
GE is offering Wellstream shareholders 780 pence ($12.33) a share in cash plus a special dividend of six pence a share, up from its previous offer of 750 pence a share. The cash portion of the deal is a 4.4% premium to Wellstream's closing price Friday. Wellstream said the cash and dividend together represent a 29% premium to its share price in September, before the company said it had received a number of preliminary approaches. Wellstream shares closed at 790 pence Monday in London.
"This is an attractive offer which, together with the special dividend, allows shareholders to realize their investment in cash at a price which reflects both our progress since Wellstream's [initial public offering] in 2007 and the potential for further growth," Wellstream Chairman John Kennedy said.
No one else is likely to mount a challenge to GE's offer, said Evolution Securities analyst Keith Morris. "It comes down to financial capability and desire, and GE wins on both counts," he said.
Under the agreement, Wellstream would pay GE 1% of the offer price if the U.K. company breaks the deal.
Wellstream specializes in making flexible pipelines used to connect the floating facilities that produce oil and gas in deep water. It operates factories in Newcastle, England, as well as in Niteroi, Brazil, which is a key growth target for GE.
"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 deep-water challenges," Santiago said.
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