The Weir Group Announces Acquisition of Mathena, Inc Broadens pressure control offering across upstream oil and gas markets
GLASGOW, Scotland, Dec. 20, 2012 /PRNewswire/ -- The Weir Group PLC ("Weir") has agreed to acquire Mathena, Inc ("Mathena"), a leading provider of pressure control rental equipment and services for onshore oil and gas drilling applications. Consideration will be via an initial payment of US$240m (£148m1) with a maximum deferred consideration of US$145m payable over two years, contingent upon meeting profit growth targets. The effective acquisition profit multiple will be reduced as a result of these payments. The goodwill on acquisition will be tax deductible, with the net present value of the cash tax benefit related to the initial payment expected to exceed U$40m. The acquisition will be funded from existing bank facilities with forecast Weir 2012 proforma net debt to EBITDA2 of c.1.5x. Based on Q4 2012 estimates, Mathena's forecast annualised 2012 EBITDA2 is US$49m.
Mathena manufactures a range of pressure control products including hydraulic chokes, mud-gas and shale-gas separators including proprietary technology for fluid separation and containment designed to meet the increasing environmental and safety requirements of shale drilling. In addition to its manufacturing expertise, Mathena differentiates itself through a strong customer service culture, product innovation and the ability to offer complete bespoke rental and service packages. The acquisition will increase the aftermarket focus of Weir Oil & Gas with approximately 80% of Mathena's revenues generated from equipment rental and 20% from related parts and service.
The acquisition is a strong strategic fit with Weir Seaboard in the pressure control market and supports the expansion of Weir's flow back services. Mathena further balances exposure between the Oil & Gas division's pressure pumping and pressure control operations and enables Weir to:
- Provide pressure control solutions across the drilling, completion and production lifecycles;
- Accelerate the growth of the business through Weir's extensive North American and international footprint;
- Benefit from the technology requirements of increasing environmental and safety regulation;
- Cross-sell a broader pressure control portfolio to the enlarged complementary customer base; and,
- Realise cost and operational synergies across the value chain through Weir's lean processes. Total synergies are expected to exceed US$5m p.a. by the third year of ownership.
Mathena accelerates Weir's strategy of creating a Tier-1 provider of surface pressure control equipment and services to upstream onshore unconventional markets. In addition to extending Weir's addressable market by over US$500m, the business expands Weir's presence in the large US drilling market and broadens its pressure control customer base. The purchase meets Weir's acquisition criteria and will be immediately earnings accretive with post tax returns expected to exceed Weir's cost of capital within the first full year of ownership.
The Mathena management team will remain with the business and are incentivised as part of the earn out structure. Subject to US regulatory approvals, completion of the acquisition is expected on 31 December 2012.
Commenting on the acquisition, Weir Chief Executive, Keith Cochrane, said: "Mathena is a well-regarded business in the US upstream oil and gas markets, with a strong management team and market share in the pressure control drilling markets. 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."
Mathena President and CEO, John Mathena, said: "Through joining the Weir Group, I believe that Mathena can continue to develop as a business committed to innovation and service in one of the world's most exciting energy markets."
A presentation containing further information on the acquisition is available from www.weir.co.uk.
Contact details: The Weir Group PLC
Andrew Neilson, Head of Corporate Affairs & Strategy
Tel: +44 (0) 141 308 3750
Jonathan Milne, Communications Manager
Tel: +44 (0) 141 308 3781
+44 (0)771 378 9536
The Maitland Consultancy
Peter Ogden, Rowan Brown
Tel : 020 7379 5151
About Mathena, Inc
Headquartered in El Reno, Oklahoma, Mathena, Inc is a leading provider of superior quality pressure control solutions in drilling applications, supported through 12 service facilities located in the key US unconventional oil and gas basins. Mathena products help to control, separate and vent abnormal pressures from the well bore during the drilling process. Mathena, Inc was founded in 1990 by Harold Mathena, the current chairman of the business. Gross assets at 31 December 2011 were US$75m with 2011 profits before taxation of US$46m. Weir is acquiring the company from entities controlled by Harold Mathena and his family.
See www.mathena-inc.com for further information.
About The Weir Group PLC
Weir, a FTSE 100 company founded in 1871 and headquartered in Glasgow, Scotland, is a global provider of engineering solutions to the minerals, oil and gas and power sectors. Our commitment to engineering excellence, research and customer focus extends equipment wear life and operational capability in some of the world's most challenging environments.
Weir is committed to going where our customers go, with a worldwide network of more than 140 manufacturing facilities and service centres. The business has a presence in more than 70 countries, with over 14,000 staff around the world working in three divisions; Minerals, Oil & Gas and Power & Industrial. Weir's customer base includes the world's largest mining houses, major oil services businesses and nuclear and conventional power generation companies.
Annual revenues were more than £2.2 billion in 2011, of which more than half came from the provision of services and aftermarket support. Emerging markets contributed around one third of overall Group revenues.
See www.weir.co.uk for further information.
1. Exchange rate of £1 = 1.6269 US$ at closing in London on 19 Dec 2012
2. EBITDA: Earnings before interest, taxes, depreciation and intangibles amortisation.
About Weir Oil & Gas
Weir Oil & Gas designs and manufactures pumps and ancillary equipment for the global upstream and downstream oil and gas markets and provides aftermarket service and support activities.
We are committed to delivering outstanding customer service and observe three key business practices: to deliver customer-driven product and service innovation; to collaborate with our customers and each other to solve problems; and to expand globally with our customers to provide responsive aftermarket services.
See www.weirinaction.com for more information.
SOURCE The Weir Group PLC