Weir Group PLC (LON:WEIR) has put its industrial pump and valves business up for sale as part of a further shift towards natural sources, especially mining.
As part of the move, Glasgow-based Weir has agreed to buy US digging tools firm ESCO for US$1.05bn funded partly by cash and by shares.
READ: Investec says Weir Group is no longer a ‘sell’
A placing through a bookbuild will raise between £350-380mln to help fund the cash component of the consideration.
Weir accompanied the acquisition with a bullish trading update that reported first-quarter orders had risen by 22% with a strong recovery in US shale oil business.
US shale production has hit records recently following the crude price rally and oil equipment orders rose 50% year-on-year and by 47% on a like-for-like basis.
Flow Control, the industrial side that supplies nuclear, chemical and power businesses, saw 2% growth but Weir said that going forward the strategy is to prioritise oil and gas and mining.
Jon Stanton, chief executive, said it had been a strong first quarter led by US fracking demand.
“Our good start to the year reflects our anticipated progress at this stage of 2018 and our full year outlook of strong constant currency revenue and profit growth remains unchanged."
ESCO, meanwhile, is a high-quality business being bought at the right at the right time and in the early stages of its recovery, he added.
Revenues at the US firm in 2017 were US$632mln with underlying earnings [pro forma adjusted EBITA] of US$68mln.
Turnover of around US$675mln and profits of US$80mln are predicted this year.
Proceeds from the sale of the flow control business would not be received before 2019, Stanton added and be used to cut debt.
Weir shares rose by 6% to 2,248p