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Weir aims for Africa and Asia expansion

GLASGOW-based Weir Group has announced three acquisitions worth £55 million that strengthen its position in North America's global mining, minerals and oil sands sectors and as an equipment supplier to the mining sectors in Asia and Africa.

QUALITY: Weir Group chief executive Keith Cochrane is developing the group's presence in growth sectors.
QUALITY: Weir Group chief executive Keith Cochrane is developing the group's presence in growth sectors.

The engineering firm, which funded the deals from existing bank facilities but declined to put a price on individual transactions, has acquired R Wales, a Canadian-based manufacturer of specialist rubber and wear-resistant lining for the mining, minerals processing and oil sands industries.

A deal to snap up the Cheong foundry near Kuala Lumpur, which supplies castings to the mining and power sectors, went through on February 6, while a second foundry acquisition, Xmeco in Port Elizabeth, South Africa, is currently before regulators. Weir hopes the Xmeco deal will get the green light in May.

Weir chief executive Keith Cochrane said: "The R Wales Group and the Cheong and Xmeco foundries enhance our presence in important growth sectors.

"The Wales Group develops our leading aftermarket offering in the minerals and oil sands sectors, while the Cheong and Xmeco foundries expand our low-cost capacity in the fast-growing regions of Asia-Pacific and Africa, enabling us to deliver quality products more quickly."

R Wales, which has facilities in British Columbia, Ontario and Arizona in the US, generated revenues of more than $30 million (£19.5m) last year.

Weir said it expects the acquisition, which completed in February 15, to be "immediately earnings accretive", and expressed confidence that post-tax returns will exceed the group's capital costs within the first year of ownership.

R Wales designs and manufactures rubber lining for pipes, tanks, chutes and hoses, and specialises in custom rubber and urethane moulded products, including slurry pump wear parts and mill liners.

Weir said that adding R Wales would complement its existing customer base and product portfolio in the North American oil sands and mining sectors. Meanwhile, Weir said it will enhance its global foundry supply chain strategy by acquiring foundries in Malaysia and South Africa.

The Cheong foundry, near Kuala Lumpur, supplies castings to several industries, including mining and power, and Weir said its acquisition would allow it to supply the Asia-Pacific region with low-cost sources.

Weir is looking to complete its acquisition hat-trick in May, when it hopes regulators will approve its offer to buy the plant, equipment and buildings of a large casting foundry in Port Elizabeth.

Providing the deal gets the green light, the Xmeco foundry will enhance Weir's capability and capacity throughout Africa, with all products sourced locally.

On the rationale behind the foundry acquisitions in Malaysia and South Africa, a spokesman for Weir said the deals provide a "low cost source for us, reinforcing our supply chain strategy". He added: "We've got a strong position in mining markets. The acquisitions are in line with our strategy."

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