Acquisition

RNS Number : 5220N

Weir Group PLC

14 June 2010

 



The Weir Group PLC

14 June 2010 

Acquisition of Malaysia-based Linatex for US$200m (£138m)¹

The Weir Group PLC ("Weir") has agreed to acquire the Linatex group of companies ("Linatex"), a global provider of wear-resistant products to the mining and sand & aggregates industries, based in Kuala Lumpur, Malaysia. A separate trading update has also been issued today regarding trading in respect of the 22 weeks ended 4 June 2010.

The consideration will be US$172.5m (£119.0m) payable in cash on completion and funded from existing bank facilities. In addition Weir anticipates assuming approximately US$27.5m (£19.0m) of net indebtedness and similar liabilities. Completion is conditional on regulatory approvals and, subject to such approvals, is expected to take place in the third quarter of 2010. The acquisition is expected to be accretive from 2011 for Weir and its returns are expected to exceed Weir's cost of capital from the second full year of ownership.

The acquisition is in line with Weir's strategy to grow its global capability, expand its emerging market footprint and further strengthen its aftermarket presence. The board of Weir believes that the acquisition will benefit the Group through:

·     the addition both of the renowned Linatex brand and products that are strongly complementary to Weir's existing offering in minerals processing;

·     enhanced global reach, Linatex having a geographic footprint well-aligned to Weir, together with an established emerging market base served from core manufacturing facilities in Malaysia and China;

·     significant potential for expansion in the Canadian oil sands market through newly developed Linatex equipment, adding to Weir's existing presence;

·     leveraging Weir Minerals' global sales network to sell Linatex's market-leading rubber products which are highly complementary to Weir's pumps, valves and cyclones, and offer many advantages over traditional metal linings.

Commenting on the transaction, Weir's chief executive, Keith Cochrane, said:

"The acquisition of Linatex creates great opportunities for our Minerals division. By combining Weir's expertise in pumps, valves and cyclones with Linatex's renowned rubber products and branding, we will have a highly complementary and competitive offering to satisfy our customers' demand for leading-edge products and service.   

"Linatex's established manufacturing capability, particularly in Malaysia and China, and its extensive customer network, provides an excellent platform for growth. We welcome Linatex management and employees to the enlarged group and look forward to a successful future together." 

Neil Macleod, group managing director of Linatex added:

"We are delighted that Linatex is joining a group with the same focus on high growth sectors in fast developing markets. There is great potential to enhance the overall offering to customers and thereby also create opportunity for employees and the continuation of the long tradition of the Linatex brand."

A conference call for analysts and investors will be held at 8 a.m. (UK time) on Monday 14^th June to discuss this statement and the trading update statement also issued today. 

For dial-in details please contact Maitland on [phone]

Contact details:

The Weir Group PLC

Helen Walker, Public Relations Manager Tel. [phone] (Mobile: [phone])

Maitland Tel. [phone]

Suzanne Bartch (Mobile: [phone])

Rowan Brown (Mobile: [phone])

¹ Exchange rate of £1 = US$ 1.45 at closing in London on 11 June 2010

Further background information

Weir intends to acquire 100% of the issued share capital of Linatex Consolidated Holdings Limited, a company registered in the British Virgin Islands. Linatex has since 2005 been owned by a fund controlled by Navis Capital, a private equity group headquartered in Kuala Lumpur.

Linatex provides rubber sheet, process equipment (including pumps, valves and cyclones), hoses, moulded products, screen media and related services, principally for highly-abrasive mining and sand and gravel applications

Headquartered in Kuala Lumpur, Linatex's operations comprise core manufacturing facilities in Batu Caves, Kuala Lumpur and Wuxi, China. Regional manufacturing centres are located in (i) Perth and Townsville, Australia; (ii) Alrode, South Africa; (iii) Yateley, UK; (iv) San Bernardo, Chile; and (v) Gallatin, Windfall, Luck and St. Croix Falls, US. There are two service centres in Canada, one in South Africa and four in Australia. In total, Linatex employs approximately 1,000 people. Additional detail is available from the company's website: www.linatex.com. 

For the year to 31 December 2009, Linatex generated sales of US$114.8m (2008: US$156.6m) and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of US$13.9m (2008: $19.7m) under IFRS. As at 31 December 2009, gross assets were US$115.4m. In the unaudited management accounts for the four months to April 2010, both sales and EBITDA are ahead of the prior year.  Profit before taxation (after interest, depreciation, amortisation and various non-recurring items) in 2009 was $1.0m (2008: $3.2m).

Cost saving initiatives envisaged by Weir are, within the second year of ownership, expected to give rise to incremental annual profits of $5-$10m.

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