Glasgow's Weir Group seals 'transformative' £300m deal to sell oil and gas arm

Weir Group, the Glasgow-headquartered global engineer, has been transformed into a “premium mining technology pure play” after sealing a £300 million-plus deal to sell its oil and gas division.

Weir Group, the Glasgow-headquartered global engineer, has been transformed into a 'premium mining technology pure play' after sealing a major deal to sell its oil and gas division.

The deal with US giant Caterpillar marks the long awaited final step in the overhaul of the historic Scots company and will see Weir play a key part in the “transition to a low carbon society”.

Jon Stanton, Weir Group chief executive, said: “We are pleased to have reached this agreement that delivers a great home for the oil and 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 and gas and marine division, added: “Combining Weir oil and 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.”

The agreement sees Weir sell the Texas-based division to Caterpillar for an enterprise value of $405m (£314m). Bosses said the disposal marked a “strong outcome for all stakeholders”.

The transaction also triggers a $70m cash tax benefit for Weir to be realised over the medium term.

Weir, which was founded in 1871 and has some 13,000 staff in more than 50 countries, expects the deal to complete by the end of 2020, assuming normal regulatory clearances.

At the end of July, the FTSE 250 firm posted a profit before tax of £63m for the six months ending 30 June, down 41 per cent from the £106m banked a year earlier. Overall revenue fell 17 per cent to just under £1.1 billion.

Stanton pointed to “unprecedented times” but said the group had “adapted quickly to the challenges of Covid-19”. He highlighted resilient demand in Weir’s core mining markets.

Weir, which did not propose paying an interim dividend due to the “ongoing uncertainty”, has taken a knock during the coronavirus crisis due to the slump in oil prices.

Stanton said at the time: “Our core mining technology businesses showed their inherent resilience and the critical role they play in keeping essential activities running. Our oil and gas team also skilfully navigated extremely challenging market conditions.

“As we look ahead, while the business is performing well, it is too early to provide guidance on the full-year given ongoing uncertainty due to Covid-19.

“More broadly, the long-term outlook for mining remains positive, supported by demographic trends, carbon transition, the long-term decline in ore grades and the need to reduce waste and water and energy consumption.”

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