Weir Group stock gets lifted by bid speculation

Shares in British engineering giant Weir Group rose by 5.8% early Friday to trade at 1836p amid bid speculation.

In Thursday's session, Weir's shares leapt as much as 47p to close at 1740p.

According to press reports, Weir’s stock has rallied on the back of buyers piling into the company’s shares after chatter that a cash-rich private equity consortium in the US is looking to table a 2,500p per share break-up offer for the group.

According to The Independent, General Electric's GE Capital is another name interested in Weir with talk in the market of a 2800p per share bid by the US giant.

Weir is no stranger to courting by its peers. Last May, the company walked away from a £3.7bn bid from Finnish rock crushing group Metso.

Back then, Weir’s shares were around 41% higher at 2,600p.

At the time, the market was not too concerned over Weir’s rejection of the offer as the group’s outlook was more rosier than now.

Since then however, the rout in global commodity prices, especially that of oil, has put Weir’s stock price under increasing pressure. The subsequent decrease in the company’s market capitalisation meant it was a contender for being booted out of the FTSE 100.

The stock however narrowly managed to cling on to its place in the London’s blue-chip index. That said, the company’s valuation is set to decrease further as oil prices remain low.

Weaker oil prices force companies like Weir who offer services to oil and gas exploration firms, to slash capital expenditure in a bid to protect margins from being hit.

Last month, a shock profit warning in February saw chief executive Keith Cochrane warn the market that the recent decline in oil price would hurt 2015 revenues, despite cost cutting initiatives being in place.

That’s left the stock vulnerable to takeovers by predators who are looking to snap up some assets on the cheap.