Texas Business reports: GLASGOW, Scotland—The Weir Group PLC plans to acquire Novatech LLC, a US manufacturer of well service pump valves and valve seats for upstream oil and gas applications, for $176 million in cash.
The consideration will be funded from existing bank facilities. The acquisition is in line with Weir's acquisition criteria and is expected to be immediately earnings accretive with post tax returns expected to exceed Weir's cost of capital within the first full year of ownership.
Subject to US regulatory approvals, completion of the acquisition is expected in February 2012.
Based in Dallas, Novatech, a family-owned business, produces a wide variety of proprietary valves and valve seats for high pressure applications such as frac, cement and mud pumps used in unconventional upstream oil and gas operations.
The business is well known to Weir, being a long standing local supplier to Weir SPM. Novatech achieved proforma revenues and EBITDA of $61.2 million and $25.2 million respectively for the most recent fiscal year ending 30 September 2011, with associated annual revenue growth of 88%.
Positive trends continued in the final quarter of calendar 2011. Approximately 90% of revenues are generated from aftermarket demand.
Novatech's range of durable valves expands Weir's offering in the fast-growing frac pump consumables markets and significantly enhances its frac pump aftermarket portfolio. The acquisition of the Dallas firm enables Weir to:
Offer an enhanced package of aftermarket pump expendables to oil and gas service companies;
Utilise its substantial footprint to provide broader sales opportunities and field service for Novatech products;
Open international markets to Novatech's offering; and,
Enhance productivity through application of Weir's lean processes in production, supply chain and front end.
“Novatech is a respected brand in the US upstream oil and gas markets, with strong market share in the frac consumables market,” said Weir chief executive Keith Cochrane in a prepared statement. “This deal enables Weir to broaden our aftermarket expendable product portfolio in this fast-growing sector, where increasing operating intensities require equipment and components to be more regularly replaced and serviced. With the recent acquisition of Seaboard, this strengthens further Weir's presence in the North American unconventional oil and gas markets and builds a larger upstream product range to offer the developing international shale markets.”
“We have worked with Weir's upstream business as a supplier for a number of years and have come to know the company well and admire the way they operate,” said Novatech chief executive Starr L. Pitzer Jr. in a statement. “Through joining the group, I believe that Weir's global sales and service networks will enable the business to grow, not only in North America, but also by taking Novatech products to international customers.”