BOSTON/NEW YORK, Jan 8 In a bid to boost its presence in the oil and gas sector, diversif

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BOSTON/NEW YORK, Jan 8 (Reuters) In a bid to boost its presence in the oil and gas sector, diversified conglomerate General Electric Co. said on Monday it will buy Vetco Gray, for roughly $1.9 billion.

Vetco Gray, a Houston-based oil and gas fields equipment supplier, is a subsidiary of Vetco International Ltd, which is owned by three private equity firms, Candover, 3i Group and JP Morgan Partners.

The transaction is expected to close in early 2007, said GE.

Vetco Gray is expected to generate more than $1.6 billion in sales in 2006, GE said. The company has 5,000 employees in more than 30 countries, with key centers in Houston in the United States, Aberdeen in the United Kingdom, Stavanger and Oslo in Norway and Singapore, GE added.

''This acquisition enables GE to seize faster growth in a rapidly expanding global business,'' said Claudi Santiago, chief executive of GE Oil&Gas, based in Florence, Italy.

The oil and gas equipment sector has been on a strong run for the past year, driven by high energy prices. GE is the world's second-largest company by market value, trailing oil titan Exxon Mobil Corp.

''It continues to get them in an area that they want to be in, at a reasonable cost,'' said Peter Klein, senior portfolio manager at Fifth Third Asset Management in Cleveland, Ohio, which owns GE shares.

''What is interesting to me is that they're not paying an arm and a leg for it,'' Klein said. ''It's a pretty good use of their capital.'' The Vetco Gray operation will fit into GE's infrastructure unit, which also makes products such as gas turbines for generating electricity and railroad engines. That unit expects to record more than $50 billion in 2007 revenue.

Vetco Gray competes with the likes of Cameron International Corp.

and FMC Technologies Inc., which also make equipment to extract oil and gas from underwater. In a note to clients, energy analyst Dan Pickering, of Pickering Energy Partners Inc., noted that Vetco Gray was ranked third in its industry, raising the possibility that GE might look to make further acquisitions in the sector.

''GE will certainly be a tough competitor, but is unlikely to do anything dumb with pricing and might continue on a consolidation path,'' Pickering wrote.

Candover, 3i and JP Morgan Partners will continue to own Vetco Aibel, which designs, engineers, builds and maintains oil and natural gas production facilities, process systems and related products, GE said.

Lehman Brothers Inc. advised the selling consortium, while JP Morgan additionally advised JP Morgan Partners on the deal.

GE shares eased 15 cents to $37.41 on the New York Stock Exchange. They gained 6.2 percent in 2006, lagging the 13.6 percent rise of the broad Standard&Poor's 500 index. .SPX> REUTERS SBA BD2051

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