General Electric acquires Dresser Waukesha

Oct. 06, 2010

By Joe Taschler and Thomas Content of the Journal Sentinel

Oct. 06, 2010 0

General Electric Co.'s $3 billion purchase of Dresser Inc. combines one of the largest companies on the planet with a company prospering from a boom in the natural gas exploration business, industry watchers said Wednesday.

The agreement also joins two companies with a decades-long presence in Waukesha County.

What the deal means for the 600 people who work for Dresser's Waukesha division remains to be seen.

The companies' lack of overlapping business, though, tends to point to a diminishing of consolidations sometimes seen in acquisitions and mergers, said Ken Brusda, president and managing director of North Star Asset Management in Menasha. "I think it's not one of those where there's a whole lot of overlap," he said.

In some deals, the companies are involved in similar or the same business segments, he said. "Then you'd have to worry about where the consolidation is going to be taking place. That may not be as big an issue in this deal."

GE's purchase includes all of Dallas-based Dresser's businesses including the former Waukesha Engine, a supplier of natural gas-fired engines now known as Dresser Waukesha.

"We're doing this deal to grow it," John Krenicki, vice chairman of GE and president and chief executive of GE Energy said of Dresser. "We know the customers. We like the technology. The businesses they have are leaders in the spaces they're in.

"We've always talked about diversity" in the energy division, Krenicki said. "The fact that we did the Dresser deal shows that we have lots of options, lots of choices and lots of room to grow and play offense."

The sale is subject to regulatory approval.

"The size and strategic fit of Dresser works well, in our view, as it adds product breadth to a core (GE) unit," said Joel Levington, a managing director of corporate credit at Brookfield Investment Management Inc. in New York.

GE Energy had $40 billion in sales last year and 85,000 employees worldwide. It has a training facility and office complex in Waukesha County.

Dresser had sales of $2 billion and earnings of $318 million last year. The company employs 6,300 people in more than 100 countries. Its majority owners are Riverstone Holdings LLC and First Reserve Corp.

Krenicki cited Dresser's large installed base of equipment worldwide, saying that "is a big reason why 40% of its total revenue is derived from aftermarket service offerings, and there is a lot of room for future expansion."

Recent discoveries of huge, cheaply accessible reservoirs of natural gas deep underground in shale formations in the U.S. and abroad are leading analysts to predict relatively low and stable natural gas prices for years to come. As a result, utilities, chemical producers and other industrial companies are using more gas.

Dresser Waukesha last week announced the sale of three, 4,800-horsepower engines to a natural gas production site in the Horn River Basin in northeastern British Columbia, Canada.

Dresser's Waukesha unit was founded in 1906 as a repair shop for automobiles. The founders of the company, Harry Horning and Frederick Ahern, later formed an engine manufacturing firm that made engines for boats, automobiles, trucks, and farm and construction equipment.

"GE has a strong track record of doing business in Waukesha County and Wisconsin as a whole and sees the value of a skilled workforce and the good quality of life we have here," said Suzanne Kelley, president of the Waukesha County Business Alliance.

The Waukesha engine business has been a member of the Waukesha County Chamber of Commerce - the precursor to the Business Alliance - since 1969, Kelley said.

"I think it's too early to tell," she said of any potential job impact. "We're hopeful that the long-term impact will be on the upside."

GE follows some of its corporate peers that are also looking to capitalize on the natural gas boom. ExxonMobil agreed to buy natural gas company XTO Energy for $31 billion last December. Royal Dutch Shell said in May that it will acquire East Resources, which has natural gas assets in two U.S. shale formations, for $4.7 billion.

Solomon Dresser founded what would become Dresser Inc. in 1880 after patenting a packer used to isolate oil below the ground, according to the company's website. Halliburton Co. acquired Dresser in 1998 and divested it in 2001.

After the announcement, General Electric shares gained 39 cents to close at $16.90.

About Joe Taschler

Joe Taschler covers aviation, the grocery industry and food production. He is also an assistant business editor, and has won state and national awards for business reporting and editing.

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