LUFK Lufkin Industries, Inc. (MM)

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held On June 27, 2013

LUFKIN INDUSTRIES, INC. 601 South Raguet Lufkin, Texas 75904-3951

To the Shareholders of Lufkin Industries, Inc.:

We will hold a special meeting of the shareholders of Lufkin Industries, Inc. at The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas 77024, on June 27, 2013, beginning at 10:00 a.m. local time, for the following purposes:

Only shareholders of record of our common stock as of the close of business on May 24, 2013 are entitled to notice of and to vote at the special meeting, or any adjournment or postponement thereof. A list of these shareholders will be available to any shareholder, for any purpose germane to the meeting, at our headquarters located at 601 South Raguet, Lufkin, Texas 75904-3951, for the 10-day period prior to the meeting and will be produced and kept at the place of the meeting during the whole time thereof and may be inspected by any shareholder who is present.

Your vote is important, regardless of the number of shares you own. The presence, in person or by proxy, of the holders of a majority of the shares of our common stock issued and outstanding on the record date will constitute a quorum for purposes of voting at the meeting. Approval of the merger agreement requires the affirmative vote of the holders of two-thirds of the shares of our common stock outstanding on the record date. If you abstain or fail to submit your proxy or to vote in person at the meeting, it will have the same effect as a vote against the proposal to approve the merger agreement. Approval of the proposal to adjourn the special meeting to solicit additional proxies requires the affirmative vote of the holders of a majority of our common stock present or represented by proxy at the meeting. Approval, on a non-binding, advisory basis, of the compensation that may be paid or become payable to our named executive officers in connection with the merger requires the affirmative vote of the holders of a majority of our common stock present or represented by proxy at the special meeting.

Even if you plan to attend the meeting in person, we request that you complete, sign, date and return the enclosed proxy or submit your proxy over the telephone or the Internet to ensure that your shares will be represented at the meeting. Voting by proxy will not prevent you from voting your shares in person in the manner described in the attached proxy statement if you subsequently choose to attend the special meeting.

If you have any questions concerning the transaction or this proxy statement, or if you would like additional copies, please contact our proxy solicitor:

Georgeson Inc.

480 Washington Boulevard

26th Floor

Jersey City, New Jersey 07310

Toll Free: 800-905-7281

Email: lufkin@georgeson.com

BY ORDER OF THE BOARD OF DIRECTORS

Alejandro Cestero

Corporate Secretary

Dated May 30, 2013

Lufkin, Texas

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are provided for your convenience and briefly address some commonly asked questions about the merger and the special meeting. They highlight only selected information from this proxy statement. You should carefully read this entire proxy statement, its annexes and the documents incorporated by reference in this proxy statement.

The Special Meeting

As of the record date, our directors and executive officers beneficially owned 1,086,992 of our outstanding shares, representing approximately 3.2% of our total outstanding shares.

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You can also attend the special meeting and vote in person. Do NOT enclose or return any stock certificates with your proxy. If the merger is completed you will receive instructions with respect to delivering your certificates and receiving the merger consideration.

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Your broker, bank, trustee or other nominee does not have discretionary voting on the proposal to approve the merger agreement, the adjournment proposal or the related compensation proposal, which means that such broker, bank, trustee or other nominee will not be able to vote your shares on these proposals without instructions from you. See “The Special Meeting.”

For the adjournment proposal and the related compensation proposal, you may vote FOR, AGAINST or ABSTAIN. If you abstain, it will have the same effect as a vote against these proposals. Failure to submit your proxy and to attend the meeting will have no effect on the approval of the adjournment proposal and the related compensation proposal. In addition, if your shares are held in the name of a broker or other nominee, your broker or other nominee also will not be entitled to vote your shares on the these proposals in the absence of specific instructions from you. These non-voted shares, or “broker non-votes,” will be counted for purposes of determining a quorum, but will have no effect on the outcome of these proposals.

If you sign your proxy card without indicating how you wish to vote, your shares will be voted “FOR” the approval of the merger agreement, “FOR” the adjournment proposal and “FOR” the approval of the related compensation proposal, and in accordance with the recommendations of our board of directors on any other matters properly brought before the meeting for a vote.

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If you are a beneficial owner holding your shares in “street name,” you may change your vote only by submitting new voting instructions to your broker, bank, trustee or other nominee. See “The Special Meeting.”

The Merger

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After the merger is completed, GE will arrange for a letter of transmittal to be sent to each of our shareholders of record. The merger consideration will be paid to each shareholder of record once that shareholder submits the letter of transmittal, properly endorsed stock certificates and any other required documentation to the paying agent identified in the letter of transmittal. Shareholders who hold their shares in street name will not be required to deliver a letter of transmittal or stock certificate to the paying agent in order to receive their merger consideration; rather, they will receive instructions from their broker or other nominee as to receipt of payment of the merger consideration.

Shares held by a shareholder who has properly perfected rights of dissent and appraisal with respect to such shares and who otherwise complies with the TBOC will not be converted into the right to receive the merger consideration, but will represent the right to receive the fair value of such shares as determined by a court in accordance with the TBOC.

Merger Sub, a Texas corporation, is a wholly owned subsidiary of GE. Merger Sub was formed on April 5, 2013 solely for the purpose of effecting the merger and has not engaged in any other business.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement and the documents incorporated by reference in this proxy statement contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management, based on information currently available to our management. Forward-looking statements can be identified by the use of the future tense or other forward-looking words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “should,” “may,” “objective,” “projection,” “forecast,” “management believes,” “continue,” “strategy,” “position” or the negative of those terms or other variations of them or by comparable terminology. In particular, statements, express or implied, concerning future actions, conditions or events, including with respect to the merger, as well as future operating results, the ability to generate sales, income or cash flow or to pay dividends are forward-looking statements.

Although we believe that these estimates and forward-looking statements are based on reasonable assumptions, they are subject to risks and uncertainties and are made in light of information currently available to us. Many factors, in addition to the factors described in this proxy statement, may cause actual results to differ from those projected in our forward-looking statements. We urge you to read carefully this entire proxy statement and the documents incorporated by reference into this proxy statement with the understanding that actual future results may be materially different from what we expect. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from those in the forward-looking statements include:

See “Where You Can Find More Information” and “Incorporation by Reference.” The foregoing list and the risks reflected in our documents incorporated by reference in this proxy statement should not be construed to be exhaustive. Forward-looking statements speak only as of the date they were made, and, except to the extent required by law, we undertake no obligation to update or to review any forward-looking statement because of new information, future events or other factors. Forward-looking statements involve risks and uncertainties and are not guarantees of future performance. There is no assurance that any of the risks described in, or that any of the uncertainties associated with the forward-looking statements discussed in this proxy statement or the documents incorporated by reference into this proxy statement will occur, or if any of them do, when they will occur or what impact they will have on our operations or financial condition. Future results and performance may differ materially from those expressed in these forward-looking statements due to, but not limited to, the factors mentioned above. Because of these uncertainties, you should not place undue reliance on these forward-looking statements when making your decision.

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THE SPECIAL MEETING

Date, Time, Place and Purpose of the Special Meeting

This proxy statement is being furnished to our shareholders in connection with the solicitation of proxies by our board of directors for use at the special meeting to be held on June 27, 2013, beginning at 10:00 a.m. local time at The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas 77024. The purpose of the special meeting is:

Board Recommendation

Our board of directors has unanimously determined that the merger agreement, the performance by us of our obligations thereunder and the consummation of the transaction contemplated by the merger agreement are fair to, advisable to and in the best interests of our shareholders, and our board of directors has unanimously approved the merger agreement and the merger. Accordingly, our board of directors unanimously recommends that our shareholders vote “FOR” the proposal to approve the merger agreement. If there are insufficient votes at the time of the special meeting to approve the merger agreement, we may propose to adjourn the special meeting for the purpose of soliciting additional proxies to approve the merger agreement. Our board of directors unanimously recommends that our shareholders vote “FOR” the adjournment proposal. Our board of directors also unanimously recommends that our shareholders vote “FOR” the approval of the related compensation proposal.

Record Date; Quorum

As of the close of business on May 24, 2013, the record date for the special meeting, there were 33,925,149 shares of our common stock outstanding held by approximately 391 shareholders of record. The presence, in person or by proxy, of the holders of a majority of the shares of our common stock issued and outstanding on the record date entitled to vote will constitute a quorum at the special meeting. Shares of our common stock represented in person or by proxy will be counted for purposes of determining whether a quorum is present at the special meeting. Abstentions and broker non-votes will be counted as present for the purpose of determining the existence of a quorum. In the event that a quorum is not present at the special meeting, we currently expect that we will adjourn the meeting, which would subject the company to additional expense.

Required Vote

The presence, in person or by proxy, of the holders of a majority of the shares of our common stock issued and outstanding on the record date will constitute a quorum for purposes of voting at the meeting. The approval of the merger agreement requires the affirmative vote of the holders of two-thirds of the shares of our common stock outstanding on the record date. Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of our common stock present or represented by proxy at the meeting. Approval of the related compensation proposal requires the affirmative vote of the holders of a majority of our common stock present or represented by proxy at the special meeting. The vote on the related compensation proposal is advisory in nature

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and will not be binding on Lufkin or our board of directors. If you abstain or fail to submit your proxy or vote in person at the meeting, it will have the same effect as a vote against the proposal to approve the merger agreement. If you abstain, it will have the same effect as a vote against the approval of the adjournment proposal and the related compensation proposal. If you fail to submit your proxy and do not attend the meeting, it will have no effect on the outcome of the adjournment proposal and the related compensation proposal.

Brokers or other nominees who hold shares of our common stock in “street name” for customers who are the beneficial owners of such shares may not vote those customers’ shares on the proposal to approve the merger agreement or the other two proposals in the absence of specific instructions from those customers. These non-voted shares of our common stock, or “broker non-votes,” will be counted for the purpose of determining whether a quorum is present, but will not be counted as shares voting on any of the proposals. Accordingly, broker non-votes will have the same effect as votes “against” the proposal to approve of the merger agreement and will have no effect on the outcome of the adjournment proposal and the related compensation proposal.

Voting; Submission of Proxy

Shareholders may vote their shares by attending the special meeting and voting their shares of our common stock in person.

Shareholders may submit their proxy by:

All shares of our common stock represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in the manner specified by the holder. If a written proxy card is signed by a shareholder and returned without instructions, the shares of our common stock represented by the proxy will be voted “FOR” the proposal to approve the merger agreement, “FOR” the adjournment proposal and “FOR” the related compensation proposal, and in accordance with the recommendations of our board of directors on any other matters properly brought before the meeting for a vote.

Shareholders who have questions or requests for assistance in completing and submitting proxy cards should contact Georgeson Inc., our proxy solicitor, toll-free at 800-905-7281.

Shareholders who hold their shares in “street name,” meaning in the name of a broker or other nominee, must either direct the broker or nominee how to vote their shares pursuant to the instructions they receive from their broker or other nominees or obtain a proxy from the record holder to vote their shares at the special meeting, in which case the shareholder attending the special meeting must present proper identification.

Revocability of Proxies

If you are a shareholder of record, you may revoke your proxy at any time before it is voted at the special meeting by:

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Simply attending the special meeting will not constitute revocation of your proxy. If your shares are held in “street name” by your broker or other nominee, you should follow the instructions of your broker or nominee regarding revocation of proxies.

Voting by Lufkin’s Directors and Executive Officers

As of May 24, 2013, the record date for the special meeting, our directors and executive officers held and are entitled to vote, in the aggregate, 1,086,992 shares of our common stock, representing approximately 3.2% of the voting power of the outstanding shares entitled to vote. These shares include 203,779 shares of restricted common stock held by our directors and executive officers, all of which will vest fully prior to the completion of the merger. We currently expect that our directors and executive officers will vote their shares in favor of the proposal to approve the merger agreement and the other two proposals, although none of them has entered into any agreement obligating them to do so.

Solicitation of Proxies; Expenses

In addition to solicitation by mail, our directors, officers and employees may solicit proxies by telephone, other electronic means or in person. These persons will not receive any additional compensation for their services, but we will reimburse them for their out-of-pocket expenses. We will reimburse banks, brokers, nominees, custodians and fiduciaries and their nominees for their reasonable expenses in forwarding copies of this proxy statement to the beneficial owners of shares of our stock and in obtaining voting instructions from those owners.

We have retained Georgeson Inc. to assist in the solicitation of proxies by mail, telephone or other electronic means, or in person, for a fee of approximately $26,500 plus expenses relating to the solicitation.

Other Business

We are not currently aware of any business to be acted upon at the special meeting other than the matters discussed in this proxy statement. Under our bylaws, business transacted at the special meeting is limited to the purposes stated in the notice of the special meeting, which is provided at the beginning of this proxy statement. If other matters do properly come before the special meeting, or at any adjournment or postponement of the special meeting, we intend that shares of our common stock represented by properly submitted proxies will be voted in accordance with the recommendations of our board of directors.

Adjournments

Adjournments may be made for the purpose of, among other things, soliciting additional proxies. Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of our common stock present or represented by proxy at the meeting, whether or not a quorum exists. At any adjourned meeting, Lufkin may transact any business that it might have transacted at the original meeting, provided that a quorum is present at such adjourned meeting. Proxies submitted by Lufkin shareholders for use at the special meeting will be used at any adjournment or postponement of the meeting. References to the Lufkin special meeting in this proxy statement are to such special meeting as adjourned or postponed.

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THE MERGER

This section of proxy statement describes the material aspects of the proposed transaction. This section may not contain all of the information that is important to you. You should carefully read this entire proxy statement, including the full text of the merger agreement (which is attached as Annex A), for a more complete understanding of the transaction. In addition, important business and financial information about us which you should read is incorporated by reference into this proxy statement. See “Where You Can Find More Information” and “Incorporation by Reference.”

Background of the Merger

On September 7, 2012, Mr. John G. Rice, Vice Chairman of GE, contacted Mr. Richard R. Stewart, a member of Lufkin’s board who is a former GE officer, to express an interest by GE, which was a significant customer of the company’s power transmission division, in a potential business combination transaction between GE and the company. This initial contact by Mr. Rice led to a meeting in Houston, Texas, on September 18, 2012, between Mr. John F. Glick, our President and Chief Executive Officer, Mr. Stewart, Mr. Jeffrey R. Immelt, the Chairman and Chief Executive Officer of GE, and Ms. Pamela Daley, who was at that time Senior Vice President of Corporate Development for GE. At the meeting, Mr. Glick advised Mr. Immelt and Ms. Daley that Lufkin’s board had not authorized any discussions of a sale of the company; however, management was willing to discuss, on a preliminary basis, GE’s interest in the company and provide GE with an improved understanding of the company’s key attributes and successes. Mr. Immelt and Ms. Daley indicated that, based on public information, GE viewed Lufkin as an attractive candidate for an acquisition, but that, before GE could develop a valuation, GE would need confidential information to complete its analysis and modeling. Mr. Immelt and Ms. Daley informed Messrs. Glick and Stewart that any further discussions regarding a potential business combination transaction with Lufkin would necessarily be on an exclusive basis. Mr. Glick concluded the meeting by reiterating that the company was not for sale, but that he would discuss GE’s indication of interest with the board.

At a special meeting of Lufkin’s board on September 20, 2012, the board received a report regarding GE’s interest in a potential business combination transaction with Lufkin and a summary of the recent discussions with GE. The board also received advice from outside counsel to the company regarding the board’s fiduciary obligations with respect to such discussions. The board concluded the meeting by reiterating that the company was not for sale, but authorized Mr. Glick to pursue and participate in a follow-up meeting with GE involving other members of Lufkin’s management in order to provide high-level information regarding the company to GE, subject to the execution of a satisfactory confidentiality agreement.

On October 1, 2012, the executive committee of the board, which advises management during the intervals between meetings of the board and is generally empowered to exercise the full power of the board during such intervals, met to receive an update from Mr. Glick regarding discussions with GE. The executive committee discussed the follow-up meeting with GE, which was scheduled for October 3, 2012. Mr. Glick advised the executive committee that several members of Lufkin’s management would participate in the meeting in order to efficiently discuss a broad range of topics. Mr. Glick also advised the executive committee that he and representatives of Simmons, Lufkin’s financial advisor in connection with its recent acquisitions, had recently had an informal conversation regarding merger and acquisition activity in the oilfield services industry. He reported that, although Simmons had not conducted any analysis, Simmons’ general impression was that Lufkin’s common stock was undervalued, and a transaction involving Lufkin should involve a significant premium to Lufkin’s then-current stock price of approximately $57.67. The executive committee did not take any action at the meeting.

On October 2, 2012, Lufkin and GE executed a confidentiality and standstill agreement, and on October 3, 2012, Mr. Glick and other Lufkin representatives met with Mr. Daniel Heintzelman, President and Chief Executive Officer of GE Oil & Gas, Ms. Daley and other GE representatives in Chicago to discuss the company.

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At the meeting, Lufkin’s representatives presented information regarding the company’s general plans, strategies, recent acquisitions and product lines, as well as additional information regarding the anticipated sources of the company’s growth by geographic region and product line. Lufkin’s representatives reiterated that the company was not for sale and explained that Lufkin’s management believed the current stock price significantly undervalued Lufkin because the company was currently burdened by various non-recurring extraordinary expenditures and investments incurred in the previous 12 months, but it had not yet realized the expected growth and other benefits associated with those expenditures and investments. At the end of the meeting, GE’s representatives indicated that they would communicate a preliminary valuation of the company or, alternatively, a decision not to make a proposal regarding a potential business combination transaction within the following weeks.

On October 24, 2012, at GE’s request, Mr. Glick and Mr. Douglas V. Smith, the Chairman of our board and of the executive committee, met with Mr. Immelt and Ms. Daley in Houston to discuss the results of GE’s analysis following the October 3, 2012 meeting. Mr. Immelt expressed a general interest in a potential acquisition of Lufkin, but indicated that GE would require additional diligence information to establish a valuation and confirm its interest in proceeding further. Mr. Glick informed Mr. Immelt that since the Lufkin board had not been considering a sale of the company, it did not seem prudent to proceed further without receiving an indication of value from GE. In response, Mr. Immelt expressed GE’s preliminary valuation of Lufkin’s common stock as being “$80ish per share” based on Lufkin’s earnings during the trailing twelve months. He suggested that a transaction would involve cash consideration, but did not provide additional information regarding the details of a potential transaction. Mr. Glick advised Mr. Immelt that the board did not view trailing twelve months earnings as representative of Lufkin’s potential, and he doubted that the board would be interested in a transaction at that valuation. Nevertheless, Mr. Glick indicated that he would communicate GE’s preliminary valuation to the board.

On October 25, 2012, the board held a special meeting to discuss the recent developments with GE. Mr. Glick provided an update with respect to the October 3, 2012 and October 24, 2012 meetings with GE and communicated GE’s preliminary valuation to the board. The board and Mr. Glick concluded that GE’s preliminary valuation likely constituted a range around $80.00 per share, but they were unsure as to its upper and lower boundaries. The board discussed at length the recent developments, the preliminary valuation range, management’s current financial estimates for the company, including a slightly weaker outlook for 2013, and whether the board should hire a financial advisor to provide an independent valuation for Lufkin. Representatives of Bracewell & Giuliani LLP, referred to as Bracewell, which had been engaged recently to serve as the company’s outside corporate counsel, joined the meeting at the board’s request and reviewed with the board its fiduciary duties applicable to the recent discussions with GE. Management advised the board that Bracewell was selected to serve as the company’s corporate counsel in part on the basis of Bracewell’s experience in the energy industry and in merger and acquisition transactions. In the ensuing discussion, the board discussed historical trading prices for Lufkin’s common stock and its belief that the current trading price had not yet benefited from Lufkin’s recent investments and capital expenditures. The board ultimately concluded that GE’s preliminary valuation range was not sufficiently compelling to pursue further discussions and instructed Mr. Glick to so inform GE. The board also concluded that it was not necessary to engage a financial advisor at that time given the informal nature of GE’s preliminary valuation range, the increased risk of information leaks that could accompany any such engagement and the board’s decision not to proceed with a transaction within the preliminary valuation range proposed by GE.

On October 30, 2012, Mr. Glick contacted Ms. Daley by telephone and informed her that the board had determined that GE’s preliminary valuation range was not sufficiently compelling to pursue further discussions with respect to a potential business combination transaction. Ms. Daley acknowledged the company’s position, but requested a follow-up discussion between GE and Mr. Christopher L. Boone, the company’s Chief Financial Officer, solely to verify information that previously had been provided by Lufkin, to which Mr. Glick consented. The follow up discussion between Mr. Boone and Mr. Robert Duffy, Vice President of Global Business Development for GE, occurred on November 1, 2012.

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At the regularly-scheduled November 7, 2012 board meeting, the board reviewed, among other items, Lufkin’s third quarter operating results and the operating and capital budgets for 2013. Mr. Glick also provided the board with an update of the October 30, 2012 and November 1, 2012 discussions, and advised the board that he had not received further contact from GE. The board determined that no further action was required with respect to GE at this time.

On November 19, 2012, Mr. Immelt contacted Mr. Glick by telephone and informed him that GE’s further analysis of the information provided by the company did not support a valuation significantly above GE’s previously-indicated preliminary valuation range. Mr. Glick reiterated that the board did not view the preliminary valuation range to be compelling. At the conclusion of the meeting, Mr. Glick and Mr. Immelt agreed to suspend discussions with respect to a potential acquisition of Lufkin. Following the November 19, 2012 conversation, Mr. Glick contacted each other member of board individually to inform them of his discussion with Mr. Immelt and to confirm that each director agreed with the decision to suspend discussions with GE. Each director confirmed his or her view that GE’s preliminary valuation range was not sufficiently compelling to pursue a potential acquisition by GE and concurred with the decision to suspend discussions with GE.

In anticipation of an upcoming Lufkin board meeting, in late January 2013, Mr. Glick requested that Mr. Stewart contact Mr. Rice to determine whether the company should treat the previously suspended discussions with GE as terminated, or if GE had any continuing interest in acquiring Lufkin. Mr. Rice suggested that Mr. Glick should call Mr. Immelt directly, which Mr. Glick did on February 7, 2013. In that call, Mr. Immelt advised Mr. Glick that GE was still interested in a potential acquisition of Lufkin and that Mr. Immelt would discuss the matter internally and revert shortly.

On February 9, 2013, Mr. Immelt contacted Mr. Glick by telephone and indicated that GE would be interested in exploring a transaction at an increased valuation from its previously expressed range, and that GE would be willing to use cash, stock or a combination thereof for an acquisition. The conversation led Mr. Glick to believe that GE could be willing to acquire the company at a value of up to $87.50 per share.

During late January and the first weeks of February, the members of the board individually reflected on the interest shown by GE and considered the time it might take for Lufkin’s business operations and general economic and market conditions to result in a Lufkin stock price significantly in excess of $80 per share. This culminated in a lengthy discussion at a board dinner facilitated by Mr. Glick on the evening of February 11, 2013, the night before the regularly-scheduled first quarter 2013 board meeting. At the dinner, the directors discussed, among other things, Lufkin’s year-end 2012 operating and financial results as well as management’s operating and financial estimate for 2013. The board also received an update from Mr. Glick with respect to GE’s interest in a transaction and its updated valuation, which Mr. Glick believed could be $87.50 per share. The board engaged in a lengthy discussion of the advantages, disadvantages and merits of a potential transaction as well the various challenges facing the company, including, among others, the fact that management’s updated 2013 budget was more cautious than prior iterations of the 2013 budget that had been provided during 2012; the challenges associated with the company’s international expansion initiatives; and an increasingly competitive landscape for Lufkin’s oilfield segment due to new entrants using aggressive pricing practices to gain market share. In particular, the board focused on the potential benefits of a transaction with GE, including, among others, the significant corporate resources that GE could provide for Lufkin’s international expansion initiatives, the synergistic opportunities provided by GE’s complementary product offerings, GE’s willingness to value Lufkin as a whole and GE’s existing familiarity with and ability to pay full value for Lufkin’s power transmission segment. The board noted that Lufkin had previously received unsolicited indications of interest from various parties about buying the company’s power transmission division, one of which was received as recently as February 7, 2013. The board believed that these overtures did not provide high enough values to be of interest, and supported its belief that Lufkin as a whole could be worth more than the sum of its parts. All of the foregoing considerations, among others, led the board to believe that GE was the potential acquiror that would be most likely to place the highest value on Lufkin as a whole and that would have the financial ability to complete a transaction. In noting the challenges facing Lufkin, the board focused on, among others, the significant future

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costs and risks associated with Lufkin’s international expansion initiatives and the time frame when those initiatives likely would result in significant contributions to the company’s operating and financial results, the significant costs and resources required to expand the company’s operations and the challenges of maintaining the resulting higher cost structure during a market downturn, the challenges in attracting and retaining qualified professionals in the competitive oilfield manufacturing industry, the continued integration efforts with respect to recent acquisitions and the anticipated future regulatory and tax landscape. The board believed that Lufkin’s operating environment and outlook had evolved since October 2012 when the board last considered a potential transaction with GE, that Lufkin had a greater likelihood of achieving significant growth with the additional resources that a larger enterprise such as GE could bring to bear and that GE’s proposal merited further consideration. The board also believed that it was now appropriate to engage a financial advisor to provide an independent view of Lufkin’s intrinsic value against which to evaluate GE’s proposal, to advise the board with respect to other potential acquirors or transaction alternatives and generally to advise the board with respect to a potential transaction. The matters discussed and the conclusions reached at the board dinner were further discussed and confirmed at the board meeting the following day on February 12, 2013, at which meeting the board also received advice from Bracewell regarding the board’s renewed interest in a transaction with GE. Additionally, at the board meeting, the board selected Simmons as its financial advisor for a potential transaction. Simmons was chosen, among other reasons, due to its experience and expertise in the oilfield services industry generally and its familiarity with Lufkin by virtue of serving as the company’s financial advisor for recent acquisitions.

On February 13, 2013, Mr. Immelt contacted Mr. Glick by telephone and inquired as to whether any developments had occurred at the recent board meeting with respect to GE’s proposal. Mr. Glick explained that the board had discussed GE’s proposal and felt that the updated valuation was at least in a range that merited further consideration. Mr. Glick also advised Mr. Immelt that the board was in the process of engaging an investment bank to assist it in evaluating GE’s updated valuation. In a telephone conversation on February 23, 2013, Mr. Immelt confirmed to Mr. Glick that GE was interested in pursuing a transaction at $87.50 per share. This was followed by a February 27, 2013 discussion in which Mr. Glick advised Mr. Immelt that the board required additional time to receive and evaluate information from its financial advisor and determine whether to proceed further with respect to a potential acquisition.

Between February 12, 2013 and February 27, 2013, Mr. Glick and other Lufkin representatives participated in various meetings and telephone discussions with representatives of Simmons in which they negotiated and executed an engagement letter, reviewed certain estimates and financial information of Lufkin and in which Simmons expressed its preliminary view, which confirmed the board’s impression, that GE’s proposal represented a compelling valuation that merited further consideration. At a brief board meeting on February 22, 2013, Mr. Glick updated the board on these matters and suggested February 28, 2012 as the date for a special board meeting with Simmons and Bracewell.

On February 28, 2013, the board held a special meeting to discuss recent developments and to receive a presentation from Simmons regarding its view of the company’s intrinsic value. Mr. Glick updated the board on his conversations with Mr. Immelt, the engagement of Simmons as the company’s financial advisor and the company’s preliminary arrangements to respond to anticipated diligence requests from GE in the event that the board determined to proceed further. The board and Simmons then participated in an interactive discussion in which Simmons presented its views of Lufkin’s intrinsic value, including a discussion of Simmons’ current outlook and forecast for the oilfield services industry generally. Simmons presented its analysis of the company’s intrinsic value compared to GE’s updated valuation of $87.50 per share using a variety of methods. Simmons explained that GE’s updated valuation exceeded the valuations produced by all but one of the valuation metrics. Simmons also identified and discussed other potential acquirors, including large-cap, diversified oilfield service companies, other strategic buyers and financial buyers, and compared these candidates with GE using a variety of criteria, including strategic interest in Lufkin, ability to consummate a transaction at a superior price to GE’s valuation and ability to cross-sell Lufkin products to existing customers. Simmons concluded that, in their view, in the event that the board decided to pursue a sale of Lufkin, GE would represent the most logical acquiror for the company due to GE’s ability to fully value both of Lufkin’s operating segments and the complementary

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nature of Lufkin’s artificial lift products to GE’s existing portfolio. The board and Simmons generally discussed the advantages and disadvantages of approaching other potential acquiror candidates to determine their interest in acquiring Lufkin. The board recognized that doing so would increase the potential for leaks of confidential information, would potentially expose Lufkin’s proprietary information to competitors and, in light of GE’s previously-expressed view of exclusivity, could diminish GE’s interest in pursuing a transaction. The board also solicited Simmons’ advice regarding the form of consideration and concluded that an all cash transaction was more attractive given, among other things, the difficulty of assessing the risk-adjusted value of stock consideration in a cross-industry transaction. Following Simmons’ presentation, the board generally considered and discussed GE’s offer and the appropriate responses thereto. The board discussed Lufkin’s ability to achieve performance levels consistent with the upside valuation metrics presented by Simmons, noting that the company had struggled to achieve board-established target performance objectives, which were meant to provide achievable goals, in recent periods. The board also considered Simmons’ view that it was unlikely that another acquiror would be willing to top GE’s proposal. The board reached a consensus that, on balance, merger consideration consisting of all cash presented the best opportunity to all Lufkin shareholders. The board also concluded that any definitive merger agreement must provide the board with the ability to terminate the merger agreement in favor of a superior proposal and, although GE would likely demand a break-up fee as is standard practice in public company mergers, the board should negotiate the lowest fee practical so as not to preclude any such proposal. Simmons’ representatives left the meeting, and representatives of Bracewell conducted an interactive discussion with the board regarding fiduciary duties. After further discussion, the board determined that Mr. Glick should (i) advise GE that, although no decision to sell Lufkin had been made, GE’s valuation was sufficiently compelling to warrant the establishment of a process for GE to perform a more thorough due diligence investigation, (ii) pursue discussions with GE regarding a potential acquisition, subject to a minimum price of $87.50 per share, (iii) with the assistance of Lufkin’s legal and financial advisors, commence the negotiation of a definitive transaction agreement containing customary terms for transactions of this type and that provides the board with the ability to consider and consummate potentially superior transactions that arise between signing and closing, and (iv) coordinate and cooperate with Simmons to allow it to render a fairness opinion to the board if and when the necessity arose. The board also requested that Mr. Glick continue to report to the board on a periodic basis regarding material developments in the discussions with GE until such time as Mr. Glick might believe it appropriate to present a definitive transaction proposal to the board for its consideration.

On March 1, 2013, Mr. Glick contacted Mr. Immelt by telephone and advised him that the board had not made a decision to sell, but that, based on the board’s review to date, the board concluded that GE’s updated valuation of $87.50 per share for Lufkin was sufficiently compelling to allow GE to commence substantive due diligence and that it would make Lufkin’s legal and financial advisors available to begin negotiating a definitive transaction agreement.

On March 6, 2013, Lufkin made available to GE an online data room, and GE and its advisors commenced due diligence. Beginning on such date and continuing through the date the merger agreement was executed, GE’s internal and external legal, financial, environmental and other subject matter experts engaged in continued due diligence of Lufkin, including through the company’s online data room, site visits and phone conferences and meetings with Lufkin’s management and advisors.

On March 20, 2013, representatives of Weil, Gotshal & Manges LLP, referred to as Weil, outside counsel for GE, provided a draft merger agreement to Bracewell. Beginning on such date and continuing through the date on which the merger agreement was executed, Weil and Bracewell exchanged drafts of the merger agreement and, together with representatives of both companies, engaged in extensive negotiations with respect thereto. Mr. Glick, Mr. Alejandro Cestero, Lufkin’s Vice President, General Counsel, Secretary and Chief Compliance Officer, and representatives of Bracewell regularly communicated with the board regarding material developments in the negotiation process. The negotiations addressed the structure of the transaction, the nature of the representations and warranties to be made by the parties, the conditions to closing, the covenants pending closing, termination rights and the fees payable upon termination in certain circumstances, remedies for breaches of the covenants and agreements contained in the merger agreement, non-solicitation obligations and matching right provisions.

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On March 26, 2013, Mr. Glick and Mr. Immelt met to discuss status with respect to a potential transaction. Mr. Glick informed Mr. Immelt that the board viewed GE’s valuation of $87.50 per share as not fully valuing the company, noting that Lufkin’s common stock had traded as high as $94 within the past two years and that under certain narrow assumptions, data prepared by Simmons could support a valuation in the mid-$90s. In response, Mr. Immelt expressed an unwillingness to increase GE’s valuation above $87.50. Mr. Glick and Mr. Immelt also discussed deal protection provisions in the draft merger agreement, in particular the “go shop” provision proposed by the company, and Mr. Immelt stated that GE would not be willing to accept a go-shop provision and reiterated that GE would not pursue a transaction other than on an exclusive basis. Mr. Glick concluded the meeting by informing Mr. Immelt that the board would await a revised valuation from GE.

On March 27, 2013, Mr. Heintzelman communicated to Mr. Glick that GE was unlikely to raise its valuation of the company above the previously-indicated $87.50 per share.

On March 28, 2013, the board held a special meeting to discuss recent developments with respect to a potential transaction with GE, to receive Simmons’ updated analysis of the proposed transaction and to receive an update from Bracewell regarding the ongoing negotiation of the merger agreement and a summary of the current draft. Mr. Glick updated the board regarding his recent discussions with Mr. Immelt and Mr. Heintzelman and related to the board Mr. Immelt’s message that GE was not interested in pursuing a transaction other than on an exclusive basis and that an increased valuation seemed unlikely. Simmons then provided an updated presentation regarding the company’s intrinsic valuation. Simmons began by discussing recent macroeconomic developments in the oilfield services industry. Simmons noted that, based on its preliminary information, first quarter 2013 spending by exploration and production companies was lower than expected. Simmons also noted that natural gas prices had increased since the previous presentation to the board but that investors were beginning to express concern about a potential domestic oil oversupply situation due to increasing domestic oil production. Simmons explained that, on balance, these developments negatively impacted the company’s long-term outlook, though not significantly. Simmons then revisited the valuation metrics initially discussed at the February 28, 2013 meeting. Simmons stated that GE’s updated valuation of $87.50 per share for Lufkin continued to exceed nearly all of the traditional valuation metrics produced by Simmons’ analysis. Simmons concluded by stating that it believed that GE’s valuation fully valued the company and likely incorporated expected synergies from a potential transaction and that a significant increase to the valuation was unlikely. Representatives of Bracewell then provided an update on the status of negotiations regarding the merger agreement. Based on such update, the board recognized that the principal outstanding issues remaining in the merger agreement concerned the inclusion of a go-shop provision, the closing conditions, the amount of the termination fee and the circumstances under which it would be payable, the ability of the company to terminate the merger agreement in favor of a superior proposal and whether the company would be required to submit the GE transaction to its shareholders in the event it desires to accept a superior proposal. Following a lengthy discussion regarding the foregoing, the board directed Mr. Glick to pursue a transaction on the following basis: (i) merger consideration of greater than $87.50 per share, which the board viewed as being supported by some of the data provided by Simmons and the previous trading high for Lufkin’s common stock; (ii) a reasonable and customary termination fee and a reduced termination fee for the first 30 days after signing; and (iii) no “force the vote” obligation in Lufkin’s fiduciary out provision that would prohibit Lufkin from terminating the merger agreement if it receives a superior proposal.

On March 29, 2013, Mr. Glick communicated the board’s positions to Mr. Immelt, and Bracewell communicated such positions to Weil. Mr. Glick again urged Mr. Immelt to consider a higher valuation for the company for the reasons previously discussed. Mr. Glick also advised Mr. Immelt that Lufkin would drop its demand for a go-shop provision in exchange for the revised deal protection provisions requested by the board.

On March 30, 2013, Mr. Immelt advised Mr. Glick that GE would agree to merger consideration of $88.50 per share. He also advised Mr. Glick that Mr. Glick’s requests regarding the various deal protection provisions were generally acceptable to GE. Mr. Glick advised Mr. Immelt that he would discuss the new valuation with the board and that he believed that this compromise justified the parties’ continuing their work on the merger agreement. Following his conversation with Mr. Immelt, Mr. Glick determined that GE’s increased indication of

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price and its concessions on deal protection warranted a board meeting with the board’s financial and legal advisors and asked Mr. Smith to schedule a board meeting for April 5, 2013.

From March 30, 2013 until the Lufkin board meeting on April 5, 2013, representatives of GE and Lufkin, and their respective legal advisors, continued to negotiate the merger agreement.

On April 5, 2013, Merger Sub was incorporated in Texas.

After the close of trading on Friday, April 5, 2013, Lufkin’s board held a special meeting attended by all members of the board as well as representatives of management and of Simmons and Bracewell. At the meeting, and before Simmons representatives were present, Bracewell reviewed the board’s fiduciary duties and the legal framework in which to consider the proposed transaction. Representatives of Simmons then joined the meeting and presented its final financial analyses of the proposed transaction, noting that the materials and financial analyses were substantially equivalent to those previously presented to the board, updated for developments since the prior materials. Simmons also delivered its oral opinion to the board, which opinion was later confirmed by delivery of its written opinion dated as of such date, that, as of April 5, 2013, based upon and subject to the assumptions and limitations set forth therein, the merger consideration to be received by Lufkin shareholders pursuant to the merger agreement was fair, from a financial point of view, to such shareholders. The full text of Simmons’ written opinion is attached as Annex B to this proxy statement. See also the section entitled “—Opinion of Simmons & Company International.” Representatives of Bracewell then summarized the material terms of the proposed transaction and noted the material changes made to the merger agreement subsequent to the board’s prior meeting on March 28, 2013. For a full summary of the merger agreement, please see the section entitled “The Merger Agreement (Proposal 1).” Following review and discussion by the board, the board unanimously determined that the merger agreement was fair to, advisable to and in the best interests of Lufkin shareholders, and voted to approve the merger agreement and the merger and to recommend that Lufkin shareholders approve the merger agreement and the merger. Following the board meeting, the merger agreement was executed.

On Monday, April 8, 2013, Lufkin and GE jointly publicly announced the execution of the merger agreement. The merger agreement and various communications were filed with the SEC on that date and thereafter.

Reasons for the Merger and Recommendation of the Board of Directors

By vote at a meeting held on April 5, 2013, our board of directors unanimously determined that the merger agreement and the transaction contemplated by the merger agreement are fair to, advisable to and in the best interests of our shareholders, approved the merger agreement and the transaction contemplated by the merger agreement and resolved to recommend that the merger agreement and the merger be approved by the company’s shareholders. Accordingly, the board unanimously recommends that our shareholders vote ‘‘FOR’’ the proposal to approve the merger agreement at the special meeting. In evaluating the merger agreement and the transaction contemplated by the merger agreement, the board consulted with Lufkin management and its legal and financial advisors and considered a number of factors in reaching its determination, approval and recommendation. The board also consulted with outside legal counsel regarding its duties and obligations and the terms of the merger agreement.

In the course of determining that the merger agreement and the transaction contemplated by the merger agreement are fair to, advisable to and in the best interests of our shareholders, the board considered, in addition to the matters discussed by the board as described above under “—Background of the Merger,” the following factors, each of which the board believes supports its decision:

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In the course of reaching the determinations and decisions and making the recommendations described above, the board considered the following risks and potentially negative factors relating to the merger agreement and the related transaction:

The board of directors considered all of these factors as a whole and, on balance, concluded that they supported a determination to approve the merger agreement. The foregoing discussion of the information and factors considered by the board includes the material factors considered, but is not exhaustive. In view of the wide variety of factors considered by the board in connection with its evaluation of the proposed merger and the complexity of these matters, the board did not consider it practical to, nor did it attempt to, quantify, rank or

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otherwise assign relative weights to the specific factors that it considered in reaching its decision. The board evaluated the factors described above, among others, and reached a consensus that the proposed transaction is fair to, advisable to and in the best interests of our shareholders. Accordingly, the board unanimously approved the merger agreement and recommends that our shareholders approve the merger agreement. In considering the factors described above and any other factors, individual members of the board may have viewed factors differently or given different weight or merit to different factors. The board approved and recommends the merger based on the totality of the information presented to and considered by it.

In considering the recommendation of the board to vote for the approval of the merger agreement, you should be aware that our executive officers and directors may have certain interests in the proposed transaction that may be different from, or in addition to, the interests of our shareholders generally. The board was aware of these interests and considered them when approving the merger agreement and recommending that the shareholders vote to approve the merger agreement. See “—Interests of Directors and Executive Officers of Lufkin in the Merger.”

The board of directors unanimously recommends that you vote “FOR” the proposal to approve the merger agreement.

Opinion of Simmons & Company International

The Lufkin board retained Simmons on February 26, 2013 to provide it with financial advisory services. Simmons was retained on the basis of its experience in similar transactions, its reputation in the investment community and its familiarity with Lufkin and its business. On April 5, 2013, Simmons rendered its oral opinion, which was subsequently confirmed in writing, to the board of directors of Lufkin to the effect that, based on and subject to various assumptions and limitations described in its opinion, as of April 5, 2013, the $88.50 in cash to be received by the shareholders of Lufkin for each share of Lufkin common stock pursuant to the terms of the merger agreement is fair, from a financial point of view, to such shareholders.

The full text of Simmons’ written opinion is attached to this proxy statement as Annex B. It describes, among other things, certain assumptions made, procedures followed, factors considered and limitations on the scope of review undertaken. You are encouraged to read Simmons’ opinion in its entirety. Simmons delivered its opinion to the board of directors of Lufkin for the benefit and use of the board of directors of Lufkin in connection with and for purposes of its evaluation of the merger consideration from a financial point of view. Simmons’ opinion did not address the relative merits of the merger as compared to other business strategies or transactions that might be available with respect to Lufkin or Lufkin’s underlying business decision to effect the merger. Simmons’ opinion did not address any other aspect of the merger and does not constitute a recommendation to any shareholder of Lufkin as to how to vote or act in connection with the proposed merger.

Simmons’ opinion was furnished for the use and benefit of Lufkin’s board of directors in connection with its consideration of the merger and was not intended to be used for any other purpose, without Simmons’ prior written consent. Simmons has expressly consented to the inclusion of its opinion in this proxy statement.

In connection with rendering its opinion, Simmons reviewed and analyzed, among other things:

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In addition, Simmons also met with certain officers and employees of Lufkin to discuss the foregoing, as well as other matters believed relevant to its analysis and considered such other information, financial studies, analyses and investigations, and financial, economic and market criteria which Simmons deemed relevant.

In arriving at its opinion, Simmons did not independently verify any of the foregoing information and relied on it being complete and accurate in all material respects. With respect to Lufkin’s financial forecasts, Simmons assumed that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of Lufkin’s management as to the future financial performance of Lufkin. Simmons relied on assurances of Lufkin management that it was not aware of any facts or circumstances that would make such financial forecasts inaccurate or misleading in any material respect. Simmons assumed that the execution version of the merger agreement was substantially the same as the draft dated April 4, 2013 that Simmons reviewed and that the merger would be consummated in accordance with the terms set forth in the merger agreement without any waiver, amendment or delay of any material terms or conditions. Simmons assumed that in connection with the receipt of all necessary governmental, regulatory or other approvals and consents required for the merger, no delays, limitations, conditions or restrictions would be imposed that would have a material adverse effect on the receipt of the merger consideration by the shareholders of Lufkin. Simmons is not a legal, tax or regulatory advisor and has relied upon, without independent verification, the assessment of Lufkin and its legal, tax and regulatory advisors with respect to such matters. Simmons did not perform any tax analysis, nor was Simmons furnished with any such analysis. In addition, Simmons did not make an independent evaluation or appraisal of the assets of Lufkin, nor did Simmons conduct a physical inspection of any of Lufkin’s properties or facilities. While Simmons was asked to analyze certain third parties as potential transaction parties, Simmons was not requested to, and did not, solicit third party indications of interest in acquiring all or any part of Lufkin.

In conducting its analysis and arriving at its opinion, Simmons considered such financial and other factors as it deemed appropriate under the circumstances including, among others, the following: (i) the historical and current financial position and results of operations of Lufkin; (ii) the business prospects of Lufkin; (iii) the historical and current market for the common stock of Lufkin and for the equity securities of certain other companies believed to be comparable to Lufkin; (iv) the value of the discounted cash flows of Lufkin under two scenarios and related sensitivities; and (v) the nature and terms of certain other acquisition transactions that Simmons believed to be relevant. Simmons also took into account its assessment of general economic, monetary, market and financial conditions and its experience in connection with similar transactions and securities

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valuation generally. Simmons’ opinion necessarily was based upon conditions as they existed and could be evaluated on, and on the information made available at April 5, 2013. No limitations were imposed by the Lufkin board upon Simmons with respect to the investigations made or procedures followed by it in rendering its opinion. Simmons has not undertaken to reaffirm or revise its opinion or otherwise comment on events occurring after the date of its opinion and expressly disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting Simmons’ opinion of which Simmons became aware after the date of its opinion.

The following represents a brief summary of the material financial analyses presented by Simmons to the board of directors of Lufkin in connection with its opinion. The following summary, however, does not purport to be a complete description of the financial analyses performed by Simmons. The order of analyses described does not represent relative importance or weight given to those analyses by Simmons. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Simmons’ financial analyses. Considering the summary data and tables alone without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by Simmons. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before April 4, 2013 and is not necessarily indicative of current market conditions.

Financial Analysis. Simmons reviewed Lufkin’s historical and projected financial performance, including, among other things, Lufkin’s historical and projected income statement data such as revenue, earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, earnings before interest and taxes, net income, and diluted earnings per share. Projected financial performance was based on the average of estimates of securities research analysts obtained from Bloomberg L.P., referred to as “consensus estimates,” using data as of April 4, 2013. Simmons reviewed projected EBITDA growth rates for Lufkin relative to public companies Simmons considered comparable to Lufkin based on their comparable business characteristics to those of Lufkin. Simmons also reviewed projected quarterly performance for Lufkin in 2013 as well as the most recent published balance sheet for Lufkin.

Transaction Premium Analysis. Simmons analyzed the merger consideration to be received by the holders of Lufkin common stock as set forth in the merger agreement based on the historical market prices of Lufkin’s common stock. The following table presents the results of this analysis:

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Securities Research Analyst Price Targets. Simmons analyzed the price targets of Lufkin, as determined by eight securities research analysts. These eight analysts represent all price target data publically available to Simmons as of April 4, 2013. In general, these price target estimates reflect a one-year forward outlook. The offer price represents a 23.6% premium to the average undiscounted research analyst target price of Lufkin and a 39.0% premium to the present value of the average target price of Lufkin using a 12.5%, which approximates Simmons’ estimate of Lufkin’s cost of capital, discount rate and a one-year discount period. Each of the eight research analyst price targets were below the offer price.

Selected Publicly Traded Companies Analysis. Simmons reviewed and compared certain financial information of Lufkin to corresponding financial information, ratios and market multiples for the following publicly traded equipment manufacturing companies:

Energy Equipment Manufacturers

Diversified Manufacturers with Energy Exposure

Simmons selected these companies on the basis of their comparable business characteristics to those of Lufkin. Although none of the selected companies are directly comparable to Lufkin, the selected companies are publicly traded companies with business and market characteristics that, for purposes of analysis, may be considered similar to certain business and market characteristics of Lufkin.

Simmons calculated and compared various financial multiples and ratios for the selected companies, and for Lufkin, based on SEC and/or international securities law filings by the respective companies and the average of consensus estimates, using closing prices on April 4, 2013. Simmons calculated the enterprise value, referred to in this section as the “Enterprise Value,” of each company as the market value of its common equity, plus the book values of its debt and preferred stock, plus minority interests held by other companies, minus investments in unconsolidated affiliates and cash and cash equivalents, including short-term and long-term marketable securities and restricted cash, plus unfunded pension liabilities. Simmons calculated Enterprise Value to EBITDA multiples of each company by dividing such company’s Enterprise Value by such company’s EBITDA. Simmons used publicly available SEC and international securities law filings for historical EBITDA data. For projected EBITDA data for the selected companies and Lufkin, Simmons used consensus estimates. Simmons also calculated net income and cash flow (defined as net income plus depreciation and amortization) multiples by

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dividing the market value of Lufkin common equity by consensus estimates for Lufkin’s projected net income and cash flow. The results of these analyses are summarized as follows:

Selected Transactions Analysis. Simmons also analyzed certain information relating to 36 selected energy equipment manufacturing transactions since 2007. Simmons selected these transactions because the business characteristics of the acquired companies were comparable to those of Lufkin. This sample of transactions was considered to evaluate the contemplated transaction in comparison to selected energy equipment manufacturing transactions on a transaction value-to-EBITDA multiple basis. For each of the selected transactions and for the transaction contemplated by the merger agreement, Simmons calculated and compared the ratio of the transaction value to the trailing twelve month EBITDA and projected EBITDA. EBITDA multiples for the selected transactions were derived primarily from public sources (company filings, press releases, Bloomberg and IHS Herold). Bloomberg and IHS Herold data are both available to the public at a subscription cost. Simmons has certain material, non-public and proprietary information regarding transactions that it receives in the course of conducting its business. Simmons used this information in its analyses, but refrained from releasing specific, identifying transaction details. The following table summarizes this analysis (code names are used for transactions in which Simmons has confidential information):

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For each of the selected transactions and for the transaction contemplated by the merger agreement, Simmons calculated and compared the ratio of the transaction value to EBITDA of the twelve-months preceding the transaction announcement. Simmons also calculated the ratio of transaction value to projected EBITDA results. For Lufkin, trailing twelve-month EBITDA represented the period of April 1, 2012 through March 31, 2013 (based on consensus estimates for Q1 2013 results), and projected EBITDA represented consensus analyst estimates for 2013. The following table summarizes this analysis:

Discounted Cash Flow Analysis. Simmons performed a discounted cash flow analysis of Lufkin to calculate the estimated present value of the standalone unlevered, after-tax free cash flows that Lufkin forecast to generate for the projected five-year period beginning on January 1, 2013 and ending on December 31, 2017. Simmons utilized consensus analyst estimates and a projection scenario provided by Lufkin’s management to develop two discounted cash flow cases, a base case and a high growth case. The base case was developed using consensus analyst forecasts for 2013 and 2014. Simmons extrapolated projections for years 2015 through 2017. The high

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growth case was developed using management projections for 2013, 2014 and 2015, and Simmons extrapolated projections for years 2016 and 2017. Case results did not reflect any transaction adjustments or forecasted synergies.

Simmons calculated illustrative implied present values of unlevered free cash flows, defined as EBITDA minus amounts estimated by Simmons for cash taxes, capital expenditures, increases (plus decreases) in net working capital and other one-time items, for the projected five-year period for both cases using discount rates ranging from 12% to 13%, which were selected based on an analysis of weighted average cost of capital for comparable companies and Lufkin. The terminal values for the cases were derived using forward EBITDA multiples of 8.0x to 9.0x, which were selected based on an analysis of average historical EBITDA multiples, and other factors, including, but not limited to, historical financial performance, profitability and scale of Lufkin’s business and comparable companies. Implied per share equity value was calculated as implied enterprise value less net debt less unfunded pension liabilities as of December 31, 2012, divided by the number of fully-diluted shares of Lufkin common stock outstanding as of February 27, 2013. This analysis indicated implied per share equity value ranges for Lufkin, as compared to the merger consideration of $88.50, of (i) $50.60 to $58.86, under the base case, and (ii) $61.38 to $71.32, under the high growth case.

Select M&A Transaction Premiums Paid. Simmons also analyzed certain information relating to the following 32 selected public energy service transactions greater than $500 million since 2006:

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For each of the selected transactions and for the transaction contemplated by the merger agreement, Simmons calculated and compared the type of consideration, transaction value and the premium or discount to the one-day and 30-trading day average closing market prices. The proposed transaction premiums are based on closing prices as of April 4, 2013. While none of the companies included in the preceding transaction premium analysis are directly comparable to Lufkin, Simmons selected these companies for comparison because they have operations that, for the purposes of analysis, may be considered similar to certain of Lufkin with respect to market size and product and service offerings. The following table summarizes this analysis:

The premiums and discounts presented above were obtained from Bloomberg and Securities Data Corporation.

Simmons also analyzed one-day and one-month prior premiums and discounts paid in public mergers and acquisitions transactions greater than $500 million since January 1, 2000, excluding any stock-funded transactions, using data obtained from Capital IQ. For each of the transactions and for the transaction contemplated by the merger agreement, Simmons analyzed the transaction value and the premium or discount to the one-day and one-month prior closing market prices. The proposed transaction premiums are based on closing prices as of April 4, 2013. The following table presents the results of this analysis:

The premiums and discounts presented above were obtained from Capital IQ.

Miscellaneous. The discussion set forth above is a summary of the material financial analyses presented by Simmons to the board of directors of Lufkin in connection with the opinion of Simmons and is not a comprehensive description of all analyses undertaken by Simmons in connection with such opinion. The presentation of an opinion as to the fairness, from a financial point of view, of consideration to be received pursuant to a proposed transaction is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial analysis is not readily susceptible to partial analysis or summary description. Simmons believes that its analyses summarized above must be considered as a whole. Simmons further believes that selecting portions of its analyses and the factors considered or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Simmons’ analyses and opinion. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary.

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In performing its analyses, Simmons considered industry performance, general business and economic conditions and other matters, many of which are beyond the control of Lufkin. The estimates of the future performance of Lufkin in or underlying Simmons’ analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by Simmons’ analyses. Neither Lufkin, Simmons nor any other person assumes responsibility if future results are materially different from those discussed. The analyses presented were prepared solely as part of Simmons’ analysis of the fairness, from a financial point of view, of the merger consideration to be received by the holders of Lufkin’s common stock and were provided to the board of directors of Lufkin in connection with the delivery of Simmons’ opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the estimates used in, and the ranges of valuations resulting from, any particular analysis described above are inherently subject to substantial uncertainty and should not be taken to be Simmons’ view of actual values with respect to Lufkin.

The terms of the merger were determined through negotiations between Lufkin and GE, rather than by any financial advisor, and was approved by the board of directors of Lufkin. Simmons did not recommend that any specific form of consideration constituted the only appropriate consideration for the merger. The decision to enter into the merger agreement was solely that of the board of directors of Lufkin. As described above under “—Background of the Merger,” Simmons’ opinion and analyses were only one of many factors considered by the board of directors of Lufkin in its evaluation of the merger and should not be viewed as determinative of the views of Lufkin’s board of directors or management with respect to the merger or the merger consideration.

Pursuant to the terms of its engagement with Simmons, Lufkin has agreed to pay Simmons for its financial advisory services in connection with the merger an aggregate transaction fee estimated to be approximately $18.9 million, $1.5 million of which was payable upon delivery of Simmons’ opinion and $17.4 million will be payable to Simmons upon consummation of the merger. Lufkin has also agreed to reimburse Simmons for its reasonable out-of-pocket expenses, including the reasonable fees and expenses of its legal counsel, incurred in connection with the engagement, including the delivery of the opinion, and to indemnify Simmons against certain losses or liabilities that may arise out of Simmons’ engagement, or to contribute to payments which Simmons might be required to make with respect to such liabilities.

In the past two years, Simmons acted as financial advisor to Lufkin on its acquisition of Quinn’s Oilfield Supply Ltd. and on other unconsummated acquisition opportunities. For this work, Simmons received fees of approximately $3.3 million. Simmons, through its subsidiary Simmons & Company International Limited, also acted as financial advisor to Zenith Oilfield Technology Ltd on its sale to Lufkin in 2012.

Simmons is an internationally recognized investment banking firm that specializes in the energy industry and is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, secondary distributions of listed and unlisted securities and private placements. In the ordinary course of Simmons’ business, Simmons actively trades the debt and equity securities of both Lufkin and GE for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in securities of Lufkin and GE.

Effects on Lufkin if the Merger is Not Completed

If the merger agreement is not approved by our shareholders or if the merger is not completed for any other reason, shareholders will not receive any payment for their shares in connection with the merger. Instead, we will remain an independent public company and our common stock will continue to be listed and traded on The NASDAQ Global Select Market. In addition, if the merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that our shareholders will continue to be subject to the same risks and opportunities as they currently are, as well as general industry, economic and market conditions. Accordingly, if the merger is not completed, there can be no assurance as to the

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effect of these risks and opportunities on the future value of your shares. If the merger is not completed, our board of directors will from time to time evaluate and review the business operations, properties, dividend policy and capitalization of Lufkin and will make such changes as are deemed appropriate. If the merger agreement is not approved by our shareholders or if the merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to Lufkin will be offered or become available, or that our stock price, business, prospects or results of operations will not be adversely impacted. If the merger agreement is terminated under circumstances described in the section entitled “The Merger Agreement (Proposal 1) —Termination Fees,” we will be obligated to pay a termination fee of $95.0 million.

Delisting and Deregistration of Lufkin Common Stock

If the merger is completed, our common stock will be delisted from The NASDAQ Global Select Market and deregistered under the Exchange Act. After completion of the merger, we will no longer be required to file periodic reports with the SEC on account of our common stock.

Source of Funds

GE and Merger Sub currently intend that the required funds for the merger consideration and other payments under the merger agreement and related expenses will be provided through available cash on hand of GE and its subsidiaries. The completion of the merger is not subject to any financing condition.

Interests of Directors and Executive Officers of Lufkin in the Merger

In considering the recommendation of the board of directors to approve the merger agreement, shareholders should be aware that our executive officers and directors may have certain interests in the proposed transaction that may be different from, or in addition to, the interests of our shareholders generally. The board of directors was aware of these interests and considered them when approving the merger agreement and recommending that our shareholders vote for the approval of the merger agreement.

Treatment of Outstanding Equity Awards

Pursuant to the term of the merger agreement, Lufkin equity awards held by its executive officers and directors that are outstanding immediately prior to the closing of the merger will be subject to the following treatment. All the payments noted below will be made less any applicable withholding taxes.

Options. As of May 24, 2013, the record date for the special meeting, our directors and executive officers held options to purchase 841,850 shares of our common stock with an exercise price of less than $88.50 per share and with a weighted average exercise price of $43.76 per share, of which 604,685 of such options were vested and 237,165 of such options were unvested. The merger agreement provides that each option issued and outstanding immediately prior to the completion of the merger, whether or not vested or exercisable, shall be cancelled and converted into the right receive a sum in cash equal to (i) the number of shares of common stock subject to their option, multiplied by (ii) $88.50 minus the per share exercise price of the option, net of any applicable withholding taxes. There are certain restrictions under the merger agreement relating to the grant of new options after April 5, 2013, and it is not expected that any of the executive officers or directors will receive any option grants between April 5, 2013 and the completion of the merger.

Restricted Stock. As of May 24, 2013, the record date for the special meeting, there were 203,779 shares of our restricted common stock held by or issuable to our directors and executive officers. The merger agreement provides that each share of restricted stock that is outstanding immediately prior to the completion of the merger will vest in full upon the completion of the merger. Each holder of shares of restricted stock will be entitled to receive $88.50 in cash, without interest and less any applicable withholding taxes, for each share of restricted stock held immediately prior to the completion of the merger.

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Summary Table. The following table shows, as of May 24, the record date for the special meeting, for each executive officer and each director, as applicable, (i) the number of shares subject to vested options held by him or her, (ii) the cash consideration that he or she will receive for such vested options upon completion of the merger, (iii) the number of shares subject to unvested options held by him or her, (iv) the cash consideration that he or she will receive for such options upon completion of the merger, (v) the number of shares of restricted stock held by him or her, (vi) the cash consideration that he or she will receive for such shares of restricted stock upon completion of the merger, (vii) the total cash consideration he or she will receive for all unvested equity awards upon completion of the merger, and (viii) the total cash consideration he or she will receive for all outstanding equity awards upon completion of the merger, in each case as of an assumed merger closing date of October 30, 2013, based on applicable holdings on the record date and assuming continued employment or service through the assumed merger closing date, October 30, 2013.