GE to buy Converteam for $3.2 billion; targets gas, grid, globe

GE Energy will acquire French firm Converteam, which manufactures electrification and automation equipment and systems for several major industries, for $3.2 billion.

GE announced on Tuesday that it will acquire 90 percent of French firm Converteam, which manufactures electrification and automation equipment and systems.

The price: about $3.2 billion.

The remaining stake will be retained by the company's senior management team, and will be gradually purchased over a two- to five-year span for another $480 million or so.

Converteam specializes in helping industrial customers replace or improve mechanical processes with high-efficiency, more reliable electric alternatives that cost less to maintain and emit fewer emissions.

The company's portfolio includes drives and other power electronics, advanced rotating machines, generators and controls that:

  • convert electricity into mechanical energy to power industrial assets such as natural gas pipelines and gas gathering compressors;
  • convert mechanical power back into electricity for wind turbine, thermal power or hydro power installations;
  • adjust electrical frequency as needed, such as for solar power inverters.

Industries that need this kind of equipment: offshore and onshore oil and gas, power generation, wind and solar renewables, industrial, marine and services.

It's a big play for GE: this kind of industry-spanning energy efficiency, electrification and automation space was valued at more than $30 billion in 2010, according to the companies.

For Converteam, the company reaps the benefits of GE's massive global presence, helping it reach customers in Brazil, Russia, China, India and the Middle East.

For GE, it's all about building its growing energy portfolio.

Specifically:

  • The electrification trend. Sales of fully electric solutions are expected to grow at 15 percent annually in compression applications within the global oil and gas industry, GE says.
  • Renewables and the smart grid. Converteam fits right into GE’s solar and smart grid portfolios, making intermittent, variable energy sources more reliable by connecting them to the grid.
  • The metals, mining and marine industries. A bigger foothold here helps GE build out platforms and supply chains.
  • Infrastructure. All of these industries are in line with previous GE Energy acquisitions, which means a greater exchange of products across customer segments.

"High-efficiency, fully electric solutions represent a megatrend across the global energy landscape," GE Energy CEO John Krenicki said in a statement. "Our customers in key industries increasingly demand more reliable, efficient and flexible solutions in order to improve their competitiveness."

The deal is set to close in Q3 2011.

This post was originally published on Smartplanet.com