David Fuller's view -
On December 28, General Electric (NYSE:GE) agreed to purchase Metem , a privately held company manufacturing based in New Jersey that specializes in making turbines last longer and operate more efficiently. The acquisition comes on the heels of GE's acquisition of Alstom in November.
The Alstom deal is expected to the crowning achievement of CEO, Jeff Immelt's management team, adding $0.05/share in 2016 and $0.15/share by 2018. Alstom will help GE achieve its re-industrialization strategy, eventually being 90% industrial and 10% capital.
The acquisition of privately held Metem, while small, is significant. It symbolizes a pro-active GE, willing to do what is necessary to 1) improve the efficiency of operations and 2) maximize profitability.
Metem is an example of the type of company that used to be widely prevalent across the United States, a manufacturing-oriented firm with strong, highly specific Technology. In Metem's case, the company, which was founded in 1962, has an expertise in turbine cooling.
"Metem Corporation has facilities globally that innovate, drill, and machine precise cooling holes and other advanced features into hard super-alloy turbine components using sophisticated machining processes. The processes range from EDM to STEM drilling and other ECM applications with a suite of supporting capabilities that includes CNC Milling and part assemblies. Through these fully-integrated diverse capabilities, Metem offers the flexibility to machine engine-ready components globally in high volumes. "
Metem, has developed (for a small company) a very nice Intellectual property ("IP") portfolio, and has been forward looking with respect to IP and manufacturing, establishing a production and R&D facility in Hungary in 2005 and acquiring 50% of ECM Technologies, an advanced precision electrochemical R&D machining company in The Netherlands in 2012. Overall, Metem has 280 employees.
I bought General Electric for my medium to longer-term trading account back in April, because after a long period of underperformance it was in the process of selling off its GE Capital unit. The next few months were inauspicious for GE and Wall Street, not least with the August meltdown, resulting in the S&P 500’s first correction of over 10% in over four years.
However, GE began to perform when Nelson Peltz’s Trian made a big bet on the company.
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