Weir snaps up US mining tools giant in major $1bn deal
● Glasgow-based group also says it is to put its flow controls arm on the market
Group, the Glasgowbased pumps and valves manufacturer, yesterday said it is to splash out $1.05 billion (£739.4 million) buying Esco Corp, an American equipment parts maker, as it seeks to bolster its mining arm.
Weir also announced it plans to offload its flow-control division, which designs process pumps and valves for the power, oil and gas industries in what some analysts said was a streamlining of the group’s priorities.
The Scottish company and other equipment makers have benefited from higher commodity prices as mining businesses increase investment to meet demand and also look to explore brownfield projects.
Esco, based in Portland, Oregon, makes parts for surface mining and the construction industry, including ground-moving equipment.
Weir said it planned to place about 16.7 million shares with institutional investors – about 7.4 per cent of the company – to partly bankroll the deal.
Announcement of the transaction yesterday came as Weir also said in a market update that orders in its first trading quarter jumped 22 per cent, with all divisions ahead of the year before.
Energy industry orders leapt 50 per cent, driven by demand for pressure pumping equipment in North American shale, where oil and gas is released from rock through the injection of sand, chemicals and water at high pressure.
Mining orders rose 13 per cent in Q1, with strong demand for both original equipment and aftermarket maintenance.
On the Esco transaction, Weir CEO Jon Stanton said it was an important development “as we focus on building on our core strengths in minerals and oil & gas.
“With Esco we’ll be joined by a world-class team and add another leading global brand. Together, Weir Minerals and Esco will create a unique cusweir tomer proposition as the premium provider of mission critical surface mining solutions from extraction to concentration, built on proprietary technology, superior wear life and supported by an unrivalled service network”.
Stanton said his group would “pursue the revenue opportunities from brining Esco productsintonewmarketsthrough our global network”.
The deal is expected to add to earnings per share in the first full year post-completion, expected in the third quarter.
Esco shareholders will receive 59 per cent of the deal value in cash and the remainder in new Weir shares.
The flow-control business to be sold accounted for $365m in revenue last year, about 15.5 per cent of the Scottish group’s total revenue. Orders for the business in the first trading quarter rose 2 per cent.
Last month, Weir reported annual pre-tax profits up 47 per cent to £250m in 2017 from £170m in 2016, on strong revenues of £2.35bn.
Stanton said the flow control division had now “turned the corner after a challenging first half”.