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Friday, March 5, 2021

Weir Group to offload its oil and gas business to Caterpillar Inc.

  • Weir Group plc to offload its oil and gas business to Caterpillar Inc.
  • The £312.67 million deal will result in a cash tax benefit of £54.04 million.
  • Weir Group says the deal is expected to close before the start of 2021.

On Monday, Weir Group plc (LON: WEIR) said that it is selling its oil and gas business to Caterpillar Inc. (NYSE: CAT) for a cash deal valued at £312.67 million. Following the completion of the transaction, the engineering firm plans on expanding its footprint in the mining business. Earlier this week, Caterpillar announced the production of next-gen mining truck.

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Weir Group jumped more than 15% in premarket trading on Monday. Shares of the company are now exchanging hands at £14.93 per share after recovering from a year to date low of £6.66 per share in March, when the impact of COVID-19 was at its peak. In comparison, Weir was trading at a higher £15.17 per share at the start of the year.

The deal will result in a cash tax benefit of £54.04 million

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Weir’s decision is attributed to the impact of the Coronavirus pandemic on global oil prices that slid sharply to result in numerous oil companies claiming bankruptcies this year. Weir is likely to relish a cash tax benefit of £54.04 million due to the sale.

In a separate announcement, Caterpillar said on Monday that it’s agreement with Weir entails the latter’s oil and gas production and services locations (more than 40 in total), and close to 2 thousand employees.

Vice President Joe Creed of Caterpillar’s oil and gas, and marine businesses commented on the news and remarked:

“This acquisition will expand our offerings to one of the broadest product lines in the well service industry.”

Caterpillar will takeover Weir’s international operations in the oil and gas sector, including in North America. The deal includes its after-market spares unit, pressure control and pressure pumping segments as well.

The deal is expected to close before the start of 2021

The deal that is likely to close before the start of 2021 is expected to help Weir bolster its balance sheet, paving way for its future investments. Learn more about the key components of a balance sheet.

As of 30th June, Weir’s oil and gas business boasts £747.4 million of gross assets. In separate news from the UK, luxury fashion company Mulberry suspended full dividend on Monday as annual loss widened due to COVID-19 restrictions.

Weir performed fairly upbeat in the stock market last year with an annual gain of more than 15%. At the time of writing, the Glasgow-based company has a market cap of £3.86 billion.

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