The Weir Group PLC : Acquisition
THE WEIR GROUP PLC
23 November 2011
Acquisition of Seaboard Holdings Inc for US$675m (£431m(1))
Weir increases presence in the growing upstream oil and gas markets
The Weir Group PLC ("Weir") has agreed to acquire Seaboard Holdings Inc
("Seaboard"), an independent wellhead solutions provider focused on the growing
North American unconventional oil and gas drilling and production markets for
US$675m (£431m(1)).
The consideration will be payable in cash on completion and funded from new and
existing bank facilities. Â In line with Weir's acquisition criteria, the
acquisition is expected to be immediately earnings accretive and post tax
returns are expected to exceed Weir's cost of capital by 2014.
Based in Houston, Texas, Seaboard manufactures engineered wellhead and pressure
control equipment to the oil and natural gas exploration and production
industries. Seaboard also provides a range of associated field and support
services, including equipment rental into the onshore oil and gas drilling,
completion and production markets. The growing shift in North America towards
unconventional oil and gas development and the rapid growth of high pressure
hydraulic fracturing has increased demand for Seaboard's products and services.
Seaboard's range of high-end surface equipment is directly adjacent to Weir's
market leading portfolio of frac pumps and other well completion equipment with
a business model closely aligned to Weir's core competencies in highly
engineered products used in harsh environments.
For the year to 31 December 2011, Seaboard is forecast to achieve proforma
revenues and EBITDA(2) of US$216m and US$58m respectively(3.)
The acquisition of Seaboard is consistent with Weir's strategy of extending its
upstream market presence in aligned markets with positive fundamentals. Â The
global surface equipment market is expected to benefit from higher drilling
activity and increasing well complexity, leading to growing demand for wellhead
and pressure control products.
Seaboard's business complements Weir's existing North American operations, SPM
and Mesa, providing significant strategic, operational and financial benefits.
 The acquisition of Seaboard:
* Extends Weir's leading position in the production and servicing of a wide
range of surface equipment targeted at unconventional drilling and
completion markets;
* Broadens the Group's product offering in conventional and unconventional oil
and gas markets;
* Complements Weir's existing customer base and expanding access to a broad
range of exploration and production businesses;
* Combines the extensive North American sales and service footprints of
Seaboard and Weir and leverages Weir's international routes to market to
accelerate revenue growth;
* Builds a platform for growth into adjacent markets not currently served by
either business; and
* Enhances productivity with the application of Weir's lean philosophy in
Seaboard's production, supply chain and front end business processes. Â Cost,
operating efficiency and procurement benefits are expected to exceed US$5m
by 2014.
The consideration is subject to customary post-closing adjustments to net
indebtedness and working capital levels at closing. Â In addition, U$3m in
deferred consideration relating to expected tax refunds will be paid six months
after the closing of the transaction. Â Related transaction costs in the region
of US$7m are expected to be incurred and will be recognised in 2011. Â Completion
is conditional on US regulatory clearance, and subject to such clearance is
expected to take place in December 2011.
Following completion of the acquisition, the existing senior management team led
by Kelly Joy, CEO, will continue to manage the business and will report to Steve
Noon, Divisional Managing Director, Weir Oil and Gas.
Commenting on the acquisition, Weir Chief Executive, Keith Cochrane, said:
"Seaboard is a well-managed business, with a strong position in a market that we
understand well. The acquisition is perfectly in line with strategy. Â It
broadens our product offering and fits into our business model of growing the
installed base of original equipment from which we drive aftermarket
opportunities. There is great potential to strengthen the business further
through our lean engineering and operational processes and extensive sales and
service networks. We are confident that the extended market opportunities and
medium term operational benefits will create significant value for our
shareholders. Â We retain financial flexibility to pursue organic growth
initiatives and further acquisition opportunities in line with our strategy."
Kelly Joy, Seaboard's President and CEO, added: "In recent months we have been
looking for the ideal partner to take the business forward while retaining
Seaboard's identity and commitment to customer service. We have spent a lot of
time with the Weir team and have been hugely impressed by the way they have
developed Weir SPM since its acquisition in 2007. I am convinced that this is
the best outcome for our employees, customers and shareholders. The senior team
at Seaboard intends to remain with the business and we are all excited by the
extensive opportunities arising from the combination with Weir."
A webcast to discuss the acquisition will be held today at 9am.
Dial-in details are:
UK Free Call  0800 694 2573  UK Standard International  +44 (0) 1452 580 733
Conference ID: 30932866
The URL to view the presentation is:
https://weir.webex.com/weir/j.php?ED=193535867&UID=0&RT=MTgjMjE%3D
Contact details: Â The Weir Group PLC
Vicky Ferrier, Head of IR and Communications Tel. 0141 302 3782
Jonathan Milne, Communications Manager Tel: 0141 302 3781/0771 378 9536
The Maitland Consultancy Tel. 020 7379 5151
Peter Ogden / Rowan Brown
Notes:
(1) Exchange rate of £1 = US$1.565 at closing in London on 22 November 2011
(2) Earnings before interest, tax, depreciation and amortisation
(3) Proforma unaudited financial information which assumes a full year
contribution from AJ Industries, the removal of non-recurring items and the
application of Weir's depreciation policy in respect of rental assets.
About Seaboard International
Seaboard achieved 2010 revenues and profits before tax of US$96.7m and US$4.3m
respectively and had gross assets of US$213.2m at 31 December 2010. Â The table
below contains unaudited proforma(3) financial information, including the July
2011 acquisition of AJ Industries, a Canadian distributor of wellhead products.
 In the year to September 2010 AJ Industries achieved revenues and profits
before tax of C$56.6m and profits before tax of C$0.4m and had gross assets of
C$24.7m at 30 September 2010.
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US$m 12m to 9m to 3m to Forecast 12m to Dec-11
Dec-10 Sep-11 Sep-11
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Sales(3) 163.1 156.7 57.3 216.0
Normalised EBITDA(2,3) 34.0 40.4 16.5 58.0
Normalised EBITA(3) 24.7 33.6 14.1 49.0
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Seaboard is being acquired from Industrial Growth Partners and the management
team.
Founded in 1974, Seaboard is one of the few remaining independent wellhead
solutions providers, manufacturing proprietary engineered wellhead and pressure
control equipment. Seaboard offers a complete wellhead and pressure control
equipment solution, providing a range of pressure control equipment, field
services, repair, frac equipment rental and tubular distribution.
The current senior management group plans to remain with Weir, including Kelly
Joy, President and CEO, who joined the company in 1996. Since 1996, Seaboard has
evolved into one of the largest independent manufacturers of wellhead and
pressure control equipment in the USA, including high pressure frac trees for
use in hydraulic fracturing applications. Seaboard also provides associated
installation and field services. Seaboard's headquarters and primary
manufacturing facilities are located in Houston, Texas, USA. Seaboard has over
20 locations covering the major oil & gas basins in North America. It employs
approximately 400 people. See www.seaboardusa.com for further information
About The Weir Group PLC
Weir, a FTSE 100 company, is a global provider of engineering solutions to the
minerals, oil and gas and power sectors. Our commitment to engineering
excellence, research and customer focus extends equipment wear life and
operational capability in some of the world's most challenging environments.
Weir is committed to going where our customers go, with a worldwide network of
more than 140 manufacturing facilities and service centres. The business has a
presence in more than 70 countries, with 13,000 staff around the world working
in our three divisions; Minerals, Oil & Gas and Power & Industrial. Weir's
customer base includes the world's largest mining houses, major oil services
businesses and nuclear and conventional power generation companies.
Annual revenues were more than £1.65 billion in 2010, of which more than half
came from the provision of services and aftermarket support. Emerging markets
contributed 39% of overall Group revenues.
Weir's Oil & Gas division is the leading supplier of high pressure pumping
equipment to the upstream oil and gas market. Â The division also produces a
range of flow control products targeted at the high pressure applications found
in the pressure pumping market. Â Weir's Oil and Gas service operations support
clients across North America, the Middle East and Europe. Â The division's
downstream operations manufacture process pumps for use in the hydrocarbon
processing industries. In 2010 the division reported revenues of £462m and
employed over 3,000 staff.
See www.weir.co.uk for further information.
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Source: The Weir Group PLC via Thomson Reuters ONE
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