(Bloomberg) - Weir Group Plc plans to acquire U.S. competitor Esco Corp. as the U.K. maker of industrial pumps strengthens its focus on the mining industry in a $1.29 billion deal including debt.
Weir rose to the highest in almost three months on Thursday after the Glasgow-based manufacturer said the purchase will produce $30 million in cost savings and add to earnings in its first year. The company will also sell its Flow Control division to narrow its business line-up.
"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," Chief Executive Officer Jon Stanton said in the statement. The company is focusing on "an improved mix of mining and oil and gas markets."
Weir is betting on two key areas with improving prospects, mining and oil. The advent of electric cars is giving mining a boost, as battery makers hunt for supplies. Oil production is also on the rise, especially in the U.S. Weir's orders last year jumped by one-fifth as contracts from the oil and gas industry surged 67 percent.
The company's shares jumped as much as 6.4 percent to 2,253 pence, the highest intraday price since Jan. 30, and were trading up 5.6 percent as of 8:33 a.m. in London. That pushed the stock to a 5.4 percent gain this year, valuing Weir at 5 billion pounds ($7.2 billion).
Closely held Esco, which is based in Portland, Oregon, has 70 factories in 20 countries and specializes in extraction equipment. The U.S. company said it expects "no significant changes" to its workforce or sites, and plans to complete the deal in the third quarter.
(Written by Tom Lavell)