The Weir Group plc is to acquire ESCO Corp, a global leader in surface mining ground engaging tools (GET), for an enterprise value of US$1.285 billion.
Weir has also announced that it intends to sell its Flow Control business as the company focuses its portfolio on highly abrasive aftermarket-intensive applications in minerals and oil & gas markets.
Portland, Oregon-headquartered ESCO is a 105 year old, family business that designs and manufactures highly engineered GET used in surface mining and construction. ESCO’s GET includes wear parts such as teeth, shrouds, adaptors, blades and locking systems that are installed on the lip systems of mission critical mining equipment.
The company has 10 manufacturing facilities, six foundries and 22 service and supply centres in 19 countries around the world, with North America accounting for 52% of its revenue. Around 90% of ESCO’s annual revenues come from aftermarket consumables. ESCO had 2017 revenues of US$632 million and pro forma adjusted EBITA of US$68 million. The business is expecting full year revenues of around US$675 million in 2018 and pro-forma adjusted EBITA of approximately US$80 million.
“The acquisition meets our near-term financial criteria before we pursue the revenue opportunities from bringing ESCO products into new markets through our global network,” said Weir Group CEO Jon Stanton. “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.”
ESCO chairman and CEO Cal Collins said: “This merger is exciting for ESCO as it combines two premium brands and positions us to better serve our customers around the world. The merger of ESCO into Weir is also a great fit, both culturally and strategically.”
Weir intends to run ESCO as a stand-alone business for the remainder of 2018. Collins will step down as chairman and CEO of ESCO after the deal closes and join the Weir board as a non-executive director. ESCO will be led by Jon Owens, the current president and chief operating officer, and will retain the current ESCO leadership team and, sales and supply chain structures.
The deal is expected to be completed early in the third quarter. The ESCO board has unanimously approved the transaction and support has been received from the required majority of ESCO shareholders. The acquisition has also been approved by the board of directors of Weir and is not subject to Weir shareholder approval.
Weir says its strategy is to prioritise opportunities for growth in minerals and oil & gas.
“We intend to initiate a process to sell Flow Control to reallocate capital to build further on our core platforms,” said Stanton.
There is no fixed timetable to sell the Flow Control division and Weir’s current assumption is that proceeds would not be received before 2019.
