Weir to buy ESCO

Weir is acquiring US mining tools manufacturer ESCO, which specialises in ground engaging tools (GET), while planning to sell its Flow Control division in a move to focus its portfolio on highly abrasive aftermarket-intensive applications in minerals and oil & gas
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ESCO's Nemisys lip system

Staff reporter

PRESS RELEASE: Weir has entered into a binding agreement to acquire ESCO Corporation, a US company based in Portland, Oregon, for US$1.05 million. ESCO produces highly engineered GET for surface mining and construction applications.
ESCO is a global business with 10 manufacturing facilities, 6 foundries and 22 service-and-supply centres in 19 countries around the world, with its core strength in North America, representing 52% of its revenue.

This compares with Weir's global minerals equipment service network, with approximately 100 service centres in key mining regions. Operating in more than 42 countries, just 22% of Weir Minerals revenue comes from North America.
According to Weir, its global network will increase the number of direct customer relationships available to ESCO. The ESCO business will also provide support for Weir's growing comminution offering, with an extensive footprint and dealer network in North America representing a clear opportunity for Weir's crusher portfolio.

ESCO will also be in the position to accelerate Weir's portfolio development through the expansion of minerals aftermarket opportunities. The business designs and manufactures GET used primarily in surface mining, with one-third of ESCO revenues from construction. ESCO's GET includes wear parts such as teeth, shrouds, adaptors, blades and locking systems that are installed on the lip systems of mining equipment. The business has chosen to focus on its core strengths in GET and has divested and exited a number of non-core activities in the last five years.

The acquisition has been approved by the board of directors of Weir and is not subject to shareholder approval. The transaction is expected to complete in early September quarter 2018.

Post-closing, Weir intends to run ESCO as a stand-alone business for the remainder of 2018.

The Weir strategy is to prioritise opportunities for growth in minerals and oil & gas. This reflects supportive long-term fundamentals for these end markets and Weir's core strengths in highly abrasive aftermarket-intensive applications that require comprehensive global support.

Consistent with this prioritisation Weir will initiate a process to sell the Flow Control division. This process will focus on maximising value for shareholders, with all options to be considered and no fixed timetable.

Commenting on the acquisition of ESCO and the announcement of the intention to sell the Flow Control division, Weir Group CEO Jon Stanton said: "With ESCO we'll be joined by a world-class team and add another leading global brand. Together, Weir Minerals and ESCO will create a unique customer proposition as the premium provider of mission critical surface mining solutions from extraction to concentration, built on proprietary technology, superior wear life and supported by an unrivalled service network.

"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. 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. We intend to initiate a process to sell Flow Control to reallocate capital to build further on our core platforms."