Shares of Glasgow-based global engineering giant Weir Group soared almost 20% on Monday after it agreed to sell its oil and gas division to Caterpillar Inc. for an enterprise value of $405 million “subject to customary working capital and debt-like adjustments at closing.”
The news followed the announcement in February 2020 that Weir would seek to maximise value from its oil and gas division as it continued its strategic transformation into a “premium mining technology pure play.”
Weir shares rose as much as 20% to around £15.10 to give the Glasgow firm a current stock market value of almost £4 billion.
Weir Group CEO Jon Stanton 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.”
Jefferies analyst Andy Douglas said the sale removes a “problem child” and leaves Weir with a “very strong” business.
Douglas said the price was higher than Jeffries had expected.