US giant Caterpillar snaps up Weir oil arm for £314million

ENGINEERING giant Weir has become the latest British company to catch the eye of overseas suitors.

The FTSE 250 firm is selling its struggling oil and gas division to US machinery titan Caterpillar, famed for its yellow diggers and bulldozers.

The £314m deal is the final step in Weir’s four- year shake- up, which began when Jon Stanton was appointed as chief executive in 2016.

The sale to Caterpillar comes as a host of British companies, including security firm G4S and bookmaker William Hill, attract interest from foreign buyers.

Stanton, 53, launched a drive to slim down the sprawling Scottish engineering firm, and now it will serve only the mining industry.

He said: ‘We’re focusing now on copper, gold, iron ore and lithium. Demand for these metals is going to grow because of general demographic trends – an expanding population, the rising middle class – and demand for copper will grow even more because of the increasing trend towards electrification.

‘Take electric cars: there is four times more copper used in an electric vehicle than in a standard combustion engine.’

Lithium, meanwhile, is used in the batteries which are increasingly popular for storing renewable energy.

Weir’s oil and gas arm, best known for its valves and pumps, has been struggling as demand for crude slumped during the pandemic. In the first six months of this year, Weir profits fell by 27pc to £108m.

Offloading the unit is an attempt by Weir to prepare it for the future, as demand for fossil fuels wanes, with companies trying to cut their carbon emissions. Weir, which was founded in 1871 by Scottish brothers George and James Weir, initially served Glasgow’s shipbuilders.

Stanton said: ‘It’s our 150th anniversary next year. We started out in the shipbuilding industry, but we have lasted because we’ve kept changing and reinventing.’

The cash will help to pay down Weir’s debt pile, while for Caterpillar the deal is a bet on the oil and gas sector surviving for several more years.

Harry Philips, an analyst at Peel Hunt, said that Weir had ‘pulled a rabbit out the hat’ with the deal. He added: ‘ The management deserves much credit for getting the asset away in the current environment and it will enable Weir to participate in mergers and acquisitions.’

Stanton confirmed that Weir would be on the hunt for companies to buy to boost its mining equipment business.

The shares shot up 15.9pc, or 203.5p, to 1483.5p – their highest level since January.

Rather than participating in mining itself, Weir creates the equipment that miners need to do their job safely.

Now the company is more focused, Stanton plans to develop technology which will help miners meet their goals of becoming more environmentally friendly.

Already Weir has shaken up the way miners crush the rocks they dig from the ground, by creating ‘ high- pressure grinding rolls’ which use much less energy and water than traditional methods.

It has also developed a system which dries out the tailings – sludge left over from mining processes – and allows it to be formed into harmless hills rather than stored behind a dam.

Previous incidents where these dams have burst have resulted in disastrous consequences for local communities affected.