METS

Weir gets Esco in $1.28B deal

Ground engaging tools (GET) specialist Esco Corporation is being bought by Weir Group (LSE: WEIR) for $US1.285 billion in a cash and scrip deal.

Noel Dyson*
Weir gets Esco in $1.28B deal

The deal is part of Weir Group's focus on positioning itself as a mining services provider with mission critical market offerings from extraction to concentration.

To better align with this approach, Weir will also be selling its Flow Control division, which makes valves. It wants to focus its portfolio on highly abrasive after-market applications in minerals and oil and gas.

Esco is a 105-year-old family business that manufactures highly engineered GET used primarily in surface mining. Its core products include the Nemisys lip system and the Ultralok mining tooth system. The installed base of Esco GETs is said to include more than 3,000 used on large mining machines.

One of the drivers for the deal was that Esco shared Weir's "razor-razor blade" aftermarket-focused business model. Aftermarket sales make up about 90% of Esco's revenues because the tools are usually used in highly abrasive conditions, meaning frequent replacements are needed.

Esco chairman and CEO Cal Collins called the deal a merger, even though Weir is referring to it as an acquisition.

"The foundation of our business for more than 100 years has been delivering value-added solutions to customers through a proud tradition of quality and customer-driven innovation," he said.

Esco used to be represented in Australia by Bradken. However, that licensing agreement ended in 2011. By then Esco was already well established, having set up Esco Holdings in Brisbane in 2009 and buying the service engineering and mining products divisions of Swift Group in 2010.

Weir Group CEO Jon Stanton said together with Esco it would 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".

"We are acquiring a high quality business at the right time with the market in the early stages of its recovery, providing opportunities for long-term growth," he said.

"Weir will be a focused premium brand business with leading technology, increased scale, an improved mix of mining and oil and gas markets, higher aftermarket sales and financial strength to invest in growth."

Under the deal Esco shareholders will get 59% of the consideration in cash with rest coming in new Weir shares.

The deal is expected to be completed in the third quarter of 2018 with integration starting in 2019.

Weir Group shares were up 6.2% early today at £22.53, capitalising the company at £5.05 billion.

*Noel Dyson is editor of www.miningmonthly.com

 

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

editions

Mining Journal Intelligence Investor Sentiment Report 2024

Survey revealing the plans, priorities, and preferences of 120+ mining investors and their expectations for the sector in 2024.

editions

Mining Journal Intelligence Mining Equities Report 2023

Access an exclusive, inside look on the quarterly mining IPOs and secondary raisings data and mining equities performance tables with an annual Stock Exchange Comparisons supplement.

editions

Mining Journal Intelligence World Risk Report 2023 (feat. MineHutte ratings)

A detailed analysis of mining investment risks across 121 jurisdictions globally, built on 11 ‘hard risk’ metrics and an industrywide survey.

editions

Mining Journal Intelligence Global Leadership Report 2023: Social licence

Gain insights into social licence trends and best practices from interviews with 20+ top mining company executives and an industrywide survey.