Weir in $405m oil and gas division sale to Caterpillar
Jon Stanton: deal maximises value for shareholders
Weir Group has announced the all-cash sale of its entire oil & gas division to Caterpillar for an enterprise value of $405 million (£314m).
The deal follows the announcement in February that Weir would seek to maximise value from its oil & gas division as it continued its strategic transformation into a premium mining technology pure play.
The Glasgow-based engineering group said the deal would transform Weir into a premium mining technology pure play with a strengthened balance sheet to provide enhanced flexibility to invest in growth opportunities.
Net proceeds will reduce the group’s leverage and provides a $70m US cash tax benefit for Weir to be realised over the medium term.
Completion is expected by the end of 2020, assuming normal regulatory clearances.
Shares in Weir Group closed 15.9% higher.
Jon Stanton, Weir Group chief executive, said: “We are pleased to have reached this agreement that delivers a great home for the Oil & Gas division and maximises value for our stakeholders.
“Alongside the previous sale of the Flow Control division and the acquisition of ESCO, it is a major milestone in transforming the Group into a focused, premium mining technology business.
“It means Weir is ideally positioned to benefit from long-term structural demographic trends and climate change actions which will increase demand for essential metals that must also be produced more sustainably and efficiently.
“This will require the innovative engineering and close customer partnerships that define Weir, and it is why we are so excited about the future.”
Joe Creed, Vice President of Caterpillar’s Oil & Gas and Marine division said: “Combining Weir Oil & Gas’s established pressure pumping and pressure control portfolio with Cat’s engines and transmissions enables us to create additional value for customers. This acquisition will expand our offerings to one of the broadest product lines in the well service industry.”
As a Class 1 Transaction the sale is conditional upon the approval of Weir shareholders with a Circular to be posted in due course, including a timetable for a General Meeting. The Oil & Gas division will now be classified as held for sale and will be reported in discontinued operations.