General Electric Company (GE): Massive Company Moving Into Shale Gas

Although this deal currently offers a relatively small premium for Lufkin investors, those who believe that brewing shareholder discontent with the current offer price will prompt General Electric Company (NYSE:GE) to make a higher offer would do well to buy into the company at these levels. Although this deal is still in its preliminary stages, there is at least one open legal investigation that concerns it directly. Since such investigations are quite common, this is not a particular cause for concern, though it does bear watching. In particular, the investigation takes issue with the restriction that the deal places on Lufkin’s ability to solicit other bids. It also mentions an onerous breakup fee and implies that the $88.50-per-share offer price significantly undervalues Lufkin. Alternatively, those who believe that Lufkin represents a good long-term investment may wish to buy into the company on the expectation that it will boost GE’s earnings in the coming years.

In sum, this deal offers an impressive opportunity for investors who wish to grab a piece of the booming shale market. Depending upon the needs of each individual investor, it can be played as a short-term arbitrage opportunity or a long-term value play. Of course, investors are reminded to conduct their own due diligence before making a purchase.

The article Massive Company Moving Into Shale Gas originally appeared on Fool.com and is written by Mike Thiessen.

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