FTSE 250 listed Weir Group (LON:WEIR) posted the largest gains of any British large-cap on Monday morning, on the news that it had successfully completed the sale of its oil and gas arm, to Caterpillar Inc (NYSE:CAT).
The sale took place for an agreed £314 million, and comes as part of Weir Group’s broader strategic shift into premium mining technology pureplay.
Net proceeds from the sale are expected to go towards reducing the Group’s leverage, with the company reporting net debt/EBITDA of 1.9x at 30 June 2020. Weir added that the transaction also facilitates a $70 million US tax benefit to be realised over the medium term.
The company added that the transaction is subject to shareholder approval, but that completion is expected by the end of 2020, assuming normal regulatory processes are cleared.
Going forwards, the company says it wants to take advantage of a low carbon society and the new mining technologies this will require. It will look to build on mission-critical position sin the mining supply chain, from extraction, to concentration and tailings management.
Speaking on the deal and the ensuing strategic shift, Weir Group CEO, Jon Stanton, commented:
“We are pleased to have reached this agreement that delivers a great home for the Oil & Gas division and maximises value for our stakeholders. Alongside the previous sale of the Flow Control division and the acquisition of ESCO, it is a major milestone in transforming the Group into a focused, premium mining technology business.”
“It means Weir is ideally positioned to benefit from long-term structural demographic trends and climate change actions which will increase demand for essential metals that must also be produced more sustainably and efficiently. This will require the innovative engineering and close customer partnerships that define Weir, and it is why we are so excited about the future.”
Following the news, Weir shares rallied by 18.32% or 234.50p, to 1,514.50p a share 05/10/20 12:27 BST. The company currently has a p/e ratio of 14.56 and a dividend yield of 1.09%.
Marketbeat’s community currently has a 58.75% ‘Underperform’ stance on the stock. And, prior to today’s annoncement, analysts had a 12-month target price of 1,263p for the stock.