GE’s energy division announced today that it will buy a roughly 90 percent, $3.2 billion stake in French electrification and automation company Converteam, expanding the industrial giant’s involvement in the electrical efficiency market.
GE will buy the equity from a controlling shareholder group that includes management, Barclays Private Equity and LBO France. Converteam senior management will retain about ten percent equity in the company for the short term, but have entered into an agreement to sell their shares to GE over the next two to five years, with the price expected to be no greater than $480 million.
The transaction is endorsed by Converteam’s management and employee representatives, and is expected to close during the third quarter of this year. GE said it expects to realize approximately $250 million in annual operating synergies by year five of the transaction.
Converteam’s services aim to help customers in a variety of industries to replace or improve their mechanical processes with high-efficiency electric alternatives that deliver better reliability, less maintenance and lower emissions. Its product portfolio includes drives and other power electronics, advanced rotating machines, generators, and controls.
Converteam operates across six key vertical sectors: offshore and onshore oil and gas, power generation, wind and solar renewables, industrial, marine, and services. GE said the acquisition will boost its smart grid portfolio and help it provide services to the metals and mining industries.
The multi-sector energy efficiency, electrification, and automation industry, in which Converteam participates, was valued at over $30 billion in 2010 and is growing at rates above global GDP growth, GE said.
Converteam's products and services are designed to reduce the electricity consumption of rotating machines by nearly one-third, offering significant savings in terms of cost, energy intensity, and greenhouse gas emissions. About a quarter of the world's electricity is used to power rotating machines in a wide range of industries and applications, GE said.
With 5,300 employees in more than 80 countries, Converteam's 2010 sales were about $1.5 billion. It had an EBITDA of $239 million, and orders grew 36 percent between 2009 and 2010.
GE says that its global reach and local expertise will improve Converteam's ability to serve customers in high growth regions such as Brazil, Russia, China, India, and the Middle East.
"High-efficiency, fully electric solutions represent a megatrend across the global energy landscape,” John Krenicki, GE vice chairman and president-CEO of GE Energy, said. "Our customers in key industries increasingly demand more reliable, efficient, and flexible solutions in order to improve their competitiveness. Converteam's world-class people and energy efficient products and services connect a lot of pieces in our portfolio which will enable us to offer integrated solutions to our customers."
