Weir Group Plc, which makes pumps and valves for the mining and energy industries, said April 19 it had agreed to buy ESCO Corp. for $1.05 billion as it looks to bolster its mining business.
Weir also said it would start a process to sell its flow- control division, which designs and manufactures process pumps and valves for power, oil and gas industries.
The flow-control business contributed $365 million pounds in revenue, or about 15.5% of its total revenue, last year.
The 147-year-old company said its first-quarter orders rose 22%, with orders in its mining business increasing more than 13%. Oil and gas orders rose more than 50%, helped by higher demand for pressure pumping equipment in North America.
Weir maintained its full-year growth outlook for revenue and profit, on a constant currency basis.
Portland, Ore.-based ESCO, which has an enterprise value of $1.29 billion, makes parts for surface mining and construction industries, including ground engaging tools to move earth.
Equipment makers like Weir have benefited from higher commodity prices as mining companies boost spending and explore brownfield projects.
"We are acquiring a high-quality business at the right time, with the market in the early stages of its recovery, providing opportunities for long-term growth," Weir's CEO Jon Stanton said.
Weir shares rose as much as 6.6% to 2,258 pence on the news of the acquisition.
ESCO shareholders will receive 59% of the deal value in cash, the remainder in new Weir shares. Weir plans to place about 16.7 million shares, or about 7.4% of its share capital, to partly fund the deal.
"Strategically, this is the right thing for Weir to be doing," Jefferies analyst Andy Douglas said, adding that acquisition looked "very solid" and the company had not overpaid.
The company expects ESCO to accelerate Weir's portfolio development through the expansion of opportunities for parts and components for mining equipment.
ESCO is expected to generate revenue of about $675 million and pro-forma adjusted EBITDA of about $80 million in 2018. The deal is expected to add to Weir's earnings per share in the first full year post completion, expected in early third quarter, the company said.
Recommended Reading
From Restructuring to Reinvention, Weatherford Upbeat on Upcycle
2024-02-11 - Weatherford CEO Girish Saligram charts course for growth as the company looks to enter the third year of what appears to be a long upcycle.
NOV's AI, Edge Offerings Find Traction—Despite Crowded Field
2024-02-02 - NOV’s CEO Clay Williams is bullish on the company’s digital future, highlighting value-driven adoption of tech by customers.
President: Financial Debt for Mexico's Pemex Totaled $106.8B End of 2023
2024-02-21 - President Andres Manuel Lopez Obrador revealed the debt data in a chart from a presentation on Pemex at a government press conference.
Hess Corp. Boosts Bakken Output, Drilling Ahead of Chevron Merger
2024-01-31 - Hess Corp. increased its drilling activity and output from the Bakken play of North Dakota during the fourth quarter, the E&P reported in its latest earnings.
The OGInterview: Petrie Partners a Big Deal Among Investment Banks
2024-02-01 - In this OGInterview, Hart Energy's Chris Mathews sat down with Petrie Partners—perhaps not the biggest or flashiest investment bank around, but after over two decades, the firm has been around the block more than most.