Caterpillar reported Monday it has agreed to purchase the oil and gasoline division of Scotland’s Weir Group for $405 million, building a bet on the electrical power sector amid a slowdown in need for its heavy products.
The offer covers more than 40 Weir Oil & Gas production and expert services locations and about two,000 staff members. Weir, which is recognised for heavy-obligation valves and pumps, has been trying to get to lessen its publicity to the volatility of hydrocarbon marketplaces and aim on its main mining products company.
Caterpillar’s shares rose two.three% to $153.35 on information of the all-income acquisition.
“Combining Weir Oil & Gas’s set up pressure pumping and pressure manage portfolio with Cat’s engines and transmissions enables us to create supplemental price for customers,” Joe Creed, vice president of Caterpillar’s oil0 & gasoline and marine division, reported in a information release.
“This acquisition will extend our choices to a person of the broadest product or service traces in the properly services sector,” he extra.
Caterpillar’s products gross sales have been sagging thanks to the effects of the coronavirus pandemic, with all a few of its company segments looking at declines in the most current quarter. Development gross sales fell 37%, mining profits was off 35% and electrical power and transportation profits slid 24%.
The enterprise reported the acquisition of Weir Oil & Gas was “consistent with Caterpillar’s tactic to devote for extended-expression, successful growth through operational excellence, expanded choices and expert services. Caterpillar is using gain of its robust balance sheet to complete this acquisition that supports the company tactic.”
In accordance to the Fiscal Instances, Weir “thrived on the back again of the commodities increase that started in the early 2000s, but from the middle of the past decade felt the chill wind of the slowdown that adopted.”
“In more current moments, the enterprise has been strike by its publicity to the North American shale sector, with need for oil falling sharply due to the fact the start of the yr,” the FT extra.
In buying and selling Monday, Weir’s shares climbed 22.5% to 1,568 pence.
Jefferies analyst Andy Douglas reported the offer removes a “problem boy or girl,” leaving Weir with a “very strong” company.