Engineering solutions provider Weir Group Plc. (WEIR.L) has agreed to acquire Mathena, Inc. for an initial payment of $240 million, with a maximum deferred consideration of $145 million payable over two years, dependent on meeting some profit growth targets.
El Reno, Oklahoma-based Mathena is a provider of pressure control rental equipment and services for onshore oil and gas drilling applications. Its products include hydraulic chokes, mud-gas and shale-gas separators.
The acquisition will be funded from existing bank facilities. Based on fourth-quarter estimates, Mathena’s forecast annualised 2012 Earnings Before Interest, Tax, Depreciation and Amortization, or EBITDA, is $49 million. The acquisition will increase the aftermarket focus of Weir Oil & Gas. Around 80 percent of Mathena’s revenues are generated from equipment rental and 20 percent from related parts and service.
According to Weir, the deal is a strong strategic fit with Weir Seaboard in the pressure control market. It supports the expansion of Weir’s flow back services. Mathena also balances exposure between the Oil & Gas division’s pressure pumping and pressure control operations.
Weir will be able to provide pressure control solutions across the drilling, completion and production lifecycles and accelerate the growth of the business through its extensive North American and international presence. Mathena expands Weir’s presence in the US drilling market and broadens its pressure control customer base.
Total synergies from the deal are expected to exceed $5 million per annum by the third year of ownership. It will be immediately earnings accretive and post tax returns are expected to exceed Weir’s cost of capital within the first full year of ownership.
The deal is expected to be completed on December 31. The Mathena management team will remain with the business.
Weir’s CEO Keith Cochrane, said, “This deal is a close strategic fit with our existing pressure control business and gives us a larger suite of products which we can sell to the expanded customer base. The business has strong growth potential and increases our exposure to shale oil and gas, markets with attractive long term structural growth prospects.”
WEIR.L advanced 1.4 percent on Wednesday to close at 1,812 pence.
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by RTT Staff Writer
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