General Electric Significantly Expands Mining, Oil & Gas

GE Acquisitions Point Way To Resources Oriented Future

General Electric Company wants to more than double the size of its new mining business to $5 billion in revenue by 2016. GE is building new revenue streams to offset its sluggish power-plant business and reduce its reliance on its big lending arm. Expansion into the mining sector would be part of a larger bet by GE on energy and resource-rich countries. The conglomerate expects them to spend heavily on its drilling and mining equipment, as well as on the medical machines and power generators it sells.

Five years ago, GE's oil and gas presence was inconsequential. But after spending $11 billion over the last five years acquiring companies, oil and gas is now a stand-alone business on track to make $14 billion of revenue this year.

In May, GE paid $700 million for an Australia-based maker of mining gear and an undisclosed sum for a U.S. mining supplier. In the energy area, it bought John Wood Group PLC's well-support business last year for $2.85 billion. In 2010, it announced two energy deals on the same day—Wellstream Holdings PLC for $1.25 billion and Dresser Inc. for $3 billion.

GE is more able to do deals now that cash from its finance arm is available again. GE Capital had stopped payments after the financial crisis to shore up its balance sheet, but the Federal Reserve approved restarting them. GE Capital will pay GE a $475 million quarterly dividend, as well as a special $4.5 billion payout this year. Much of that is earmarked for stock dividends and buybacks, but it does boost GE's capacity to do deals.

So far this year, GE has spent $1.6 billion on 14 deals. That compares with $7 billion in 2011 and $5.8 billion in 2010, according to data-provider Dealogic Inc.

Early in his tenure as CEO, Mr. Immelt spent about $15 billion on deals a year, with a high in 2003 of $36.4 billion when GE agreed to buy Vivendi Universal's film and TV assets to form NBCUniversal (sold to Comcast) and U.K. medical diagnostic firm Amersham PLC. (WSJ, 9/24/2012)