The Wall Street Journal-20080129-GE Adds Heft In Oil Patch In Tenaris Deal
Return to: The_Wall_Street_Journal-20080129
GE Adds Heft In Oil Patch In Tenaris Deal
Full Text (285 words)Reuters News Service
Tenaris SA, which makes pipe for the energy industry, agreed to sell its Hydril pressure-control business to General Electric Co. for $1.12 billion on a debt-free basis.
Hydril, which GE said is expected to generate more than $400 million in sales this year, focuses on pressure-control equipment used in the oil-and-gas drilling industry.
The deal increases GE's presence in the deep-water drilling industry. GE bought Vetco Gray last year to expand in the business of drilling oil wells under hundreds of feet of seawater.
As oil prices have climbed over the past few years, with demand from China and India rising, oil producers have looked at new sources of crude oil previously considered too costly to tap.
"This acquisition will expand our existing range of products and services and allows us to provide a broader offering of capital drilling equipment to the increasingly complex offshore industry," said Claudi Santiago, president and chief executive of GE Oil & Gas, based in Florence, Italy.
Tenaris, which is based in Luxembourg and acquired Hydril in May, said that the business doesn't fit with its core operations. Tenaris, controlled by Argentine conglomerate Technint, has shares listed in Buenos Aires, Milan and New York. The company's American depositary receipts yesterday rose $1.64, or 4.3%, to $39.62.
The Hydril sale comes after Tenaris's recent expansion in North America has put its profit margin under pressure because of slowing drilling activity in Canada and higher production costs.
In 2006, the company bought U.S. Maverick Tube Corp. for $3.18 billion, and last year it bought U.S. Hydril for $2.1 billion.
Tenaris said the deal is subject to governmental and regulatory approval and is expected to close in the second quarter.
