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Caterpillar Buys Weir Group's Oil and Gas Division for $405 Million

Caterpillar's purchase includes more than 40 Weir oil and gas manufacturing and services facilities and about 2,000 employees.
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Caterpillar  (CAT) - Get Free Report shares rose Monday after the construction equipment titan announced it was buying the oil and gas division of Weir Group  (WEGRY) , a Scotland-based engineering company for $405 million in cash.

The transaction includes more than 40 Weir oil and gas manufacturing and services facilities and approximately 2,000 employees. Caterpillar has been hit hard by the coronavirus pandemic that stalled business activity around the world.

The company’s shares recently traded at $151.80, up 1.24%, and have firmed 2% year to date through Friday.

“Combining Weir Oil & Gas’s established pressure pumping and pressure control portfolio with Cat’s engines and transmissions enables us to create additional value for customers,” Joe Creed, vice president of Caterpillar’s oil & gas and marine division, said in a statement on Monday.

“This acquisition will expand our offerings to one of the broadest product lines in the well service industry,” Creed added.

Morningstar analyst Scott Pope voiced enthusiasm for the company after its second-quarter earnings report in July.

“We believe Caterpillar’s strategy of manufacturing premium equipment with lowest total cost of ownership equipment is optimal regardless of economic conditions,” he wrote.

“The recent pandemic highlighted unanticipated benefits of Caterpillar’s leading autonomous and telematics solutions that reduce person-to-person interaction, which could lead to share gains in the long run.”

In addition, “increased gold and copper prices could boost adoption of Caterpillar's autonomous mining solutions as these miners have historically been strong adopters of such technology,” Pope said.

He put fair value for Caterpillar shares at $148.