Deal to Buy Converteam for $3.2 Billion Boosts GE in Power Conversion, Automation

GE’s Atlanta-based Energy business has entered into an agreement to acquire approximately 90 percent of Converteam, Massy, France, a provider of electrification and automation equipment and systems, from a controlling shareholder group that includes management, Barclays Private Equity and LBO France, for approximately $3.2 billion.

Converteam’s name only dates back to 2006, but the businesses it comprises go back more than a century. The company grew through acquisitions of several U.S. and European manufacturing and service companies, including Westinghouse Drives and Electric Machinery of the U.S., General Electric Company (GEC) of the U.K., Compagnie Générale d’Electricité (CGE) and Alstom of France,and Allgemeine Elektrizitäts-Gesellschaft (AEG) of Germany, among others.

The transaction, endorsed by Converteam’s management and employee representative groups, is expected to close during third quarter 2011, subject to customary closing conditions. Converteam’s senior management will retain approximately a 10 percent stake in the company. GE and Converteam senior management have agreements under which GE would purchase the remaining shares in the company over the next two to five years for up to $480 million, depending on time of sale and business performance.

Converteam’s products and services “enable customers in a variety of industries to replace or improve mechanical processes with high-efficiency electric alternatives that deliver better reliability, less maintenance and lower emissions. Converteam’s portfolio includes drives and other power electronics, advanced rotating machines, generators and controls that when

integrated address three critical customer needs across a range of industries,” said a GE release.

Those three needs are converting electricity into mechanical performance to power and control motion or industrial assets such as natural gas pipelines and gas gathering compressors; turning mechanical power into grid quality electricity in wind turbine, thermal power or hydropower installations; and adjusting electrical frequency to precise user requirements, as in solar power inverters.

Converteam’s motors and generators business concentrates on oil and gas, marine, power generation, industrial and renewable energy applications.

Its drives and converters include start-up and soft-start converters, variable-speed pumping applications, subsea and high-speed drives used in oil and gas applications, energy storage converters and marine propulsion drives.

Its automation solutions include top-level control architectures for controlling open automation systems in power electronics and automation, dynamic positioning systems and diagnostic systems.

Among the benefits for Converteam in combination with GE, the company’s release points to a significant increase in its global reach “in a market where critical mass is key to remaining competitive and to seizing new business opportunities,” and the benefits of “additional investment capacity and superior infrastructure to grow successfully in power conversion and access to a first-tier client base.”

“GE is the ideal partner for Converteam,” said Converteam Chairman and CEO Pierre Bastid. “Our strong position in the Power Conversion business is highly complementary to GE’s global leadership in the energy value chain. This transaction will significantly bolster Converteam’s strategic ambitions to further globalize its business, strengthen its worldwide delivery capabilities and create a reference industrial player. It will also help Converteam build the strength and scale to compete on major international contracts.”

Converteam has 5,300 employees, including more than 1,600 engineers, and operates in more than 80 countries. Converteam recently announced 2010 sales of approximately $1.5 billion and EBITDA of approximately $239 million, with approximately 36 percent growth in orders versus 2009.