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GE to Expand Renewable Energy Unit with LM Wind Power Buy


Trades from $3

General Electric Company (GE - Analyst Report) recently declared its intention to purchase LM Wind Power for $1.65 billion (€1.5 billion). This deal is expected to close in the first half of 2017, while it is expected to be accretive to earnings in 2018.

Headquartered in Kolding, Denmark, LM Wind Power is the world's largest independent supplier of rotor blades to the wind industry. It has produced over 185,000 blades since 1978. The company is owned by Doughty Hanson, a London-based private equity firm. LM Wind Power has its operations across four continents in eight countries, including Denmark, Spain, Poland, Canada, the U.S., India, China and Brazil.

Per the terms of the acquisition, it will provide wind turbine blades for General Electrics’ Renewable Energy business, enhancing its ability to augment energy output and create value for its onshore and offshore customers.

According to Jerome Pecresse, President and CEO of GE Renewable Energy, the deal will allow the company to have a huge pipeline of technical innovations which could reduce the cost of electricity. Both the companies have a pronounced global footprint which will help build a better set of solutions for its customers worldwide. This acquisition will facilitate sustainable growth in the wind power industry. The acquisition will boost General Electric’s digital and services capabilities.

Post integration, General Electric aims to operate LM Wind Power as a separate unit within GE Renewable Energy. In addition, General Electric will retain the facility to source blades from other suppliers. LM Wind Power will be led by its existing management team and be headquartered in Denmark, which will continue to be its global technology center.

GE Renewable Energy is a $9 billion start-up within General Electric and has one of the broadest and most extensive portfolios in the industry. The company is focused on making the world a better and cleaner place. It has the largest renewable energy installed base with 370 GW and is present across 40 countries, with 13,000 employees. Supported by the world’s first digital industrial company, GE Renewable Energy is determined to change the future of energy.

We remain encouraged by such strategic endeavors of this Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the industry include Raven Industries Inc. (RAVN - Analyst Report) , Sumitomo Corporation (SSUMY - Snapshot Report) and Leucadia National Corporation (LUK - Snapshot Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Raven has a long-term earnings growth expectation of 10% and is currently trading at a forward P/E of 44.9x. Its share price has increased by approximately 41.6% year to date.

Leucadia National has a long-term earnings growth expectation of 18% and is currently trading at a forward P/E of 97.6x. Its share price has increased by approximately 10.8% year to date. 

Sumitomo has a long-term earnings growth expectation of 5% and is currently trading at a forward P/E of 11.8x. Its share price has increased by approximately 13.2% year to date.

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