Weir’s £113m move raises its stake in controversial ‘fracking’

By Kristy Dorsey
Published on Thursday 26 January 2012 00:00

WEIR Group has further extended its reach into the high-growth but controversial shale gas market with the £113 million cash acquisition of US pump valve maker Novatech.

The deal, to be financed from Weir’s existing banking facilities, follows the £430m purchase of Seaboard Holdings of Texas in November last year. Like Seaboard, Novatech specialises in equipment used in fracking – the fracturing of shale formations to develop “unconventional” gas and oil reserves.

Fracking has been attacked by environmentalists as ecologically unsound, and fracking tests are thought likely to have triggered two minor earthquakes in Lancashire last year.

However, the process is becoming more widely-used amid the push for energy security.

Yesterday’s announcement came in the wake of US President Barack Obama’s State of the Union address, in which he backed natural gas fracking as a cleaner energy source with the potential to create up to 600,000 jobs.

Keith Cochrane, chief executive of Weir, said it was “encouraging” to see what effect government support was having on development in the sector.

“Clearly it is on the administration’s radar, and that is having a positive boost,” he said.

Novatech has been bought from its family owners, with the deal expected to complete next month. The company makes well service pump valves and valve seats for upstream applications, with more than 90 per cent of its revenues generated in the after-market for repairs and servicing.

The Dallas-headquartered company’s products are currently sold only in North America, where the fracking industry is most developed. Weir, with more than 13,000 staff in 70 countries, will expand the business internationally as drilling in shale formations increasingly takes hold in places such as Argentina, Brazil, China and the Middle East.

“At the right point, we will look to invest and support these markets as well,” Cochrane said. “At this time they are at a fairly embryonic state, but they will develop in the future.”

Novatech has been a supplier to SPM Flow Control – now Weir SPM – for more than a decade. Cochrane said Weir, which acquired SPM in June 2007, had been in lengthy takeover discussions with family owners to determine the right time for an outright acquisition of Novatech.

During the year to September, Novatech saw sales jump by 88 per cent to $61.6m (£39.5m). Earnings reached $25.2m (£16.2m) on an EBITDA basis.

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