Weir snaps up $1.3bn ground-tools outfit as Q1 orders expand

Engineer Weir Group has acquired US-based ground engaging tools specialist ESCO for $1.28bn and also reported orders increased 22% across all divisions in the first quarter, outperforming its main markets.

The Glasgow-headquartered group said the addition or Portland, Oregon-based ESCO would create a "unique" mining services provider with solutions ranging from extraction to concentration.

ESCO last year delivered revenues of $632m and a pro forma adjusted earnings before interest, tax and amortisation of $68m, with strong growth in 2018 expected to result in full-year revenues of around $675m.

"Together, Weir Minerals and ESCO will create a unique customer proposition as the premium provider of mission-critical surface mining solutions from extraction to concentration, built on proprietary technology, superior wear life and supported by an unrivalled service network," Weir's chief executive Jon Stanton said.

Payment to ESCO shareholders will be made by a 59% cash consideration, partly funded from the net proceeds of a 7.4% equity placing of Weir shares via an accelerated bookbuild, and a further 41% settled via the issue of new Weir shares.

In the first quarter Weir reported aftermarket orders up 19%, with original equipment up 27%, and revenues, on a constant currency basis, came in line with expectations and ahead of the prior year.

The FTSE 250 constituent generated a positive book-to-bill ratio of 1.14 over the three-month period.

Global mining markets continued to benefit from supportive commodity prices with the industry remaining focused on optimising the production and efficiency of current mining operations which helped the division take full advantage of its previous investments in extending its on-the-ground engineering and sales capabilities.

Over at Weir's oil and gas operations, strong drilling and completion activity levels continued in North American onshore oil and gas markets as the division reinforced its position as the "preferred provider" of equipment and services to major shale pressure pumpers.

Net debt was higher than a year ago, though it did not provide an exact figure apart from to highlight that it remained in line with "normal seasonal patterns".

Stanton said, "In mining, our largest market, our 2017 investment in sales and engineering capability enabled us to provide more solutions to miners focused on increasing productivity from their current assets."

"In Oil and Gas, shale continued to demonstrate its increased relevance with record North American production supported by our leading technology pressure pumping products and services. Flow Control benefited from operational improvements and encouraging momentum in its main markets," he added.

As of 0920 BST, shares had collected 5.19% to 2,228p.