INVESTORS have wiped £180 million off the stock market worth of Weir Group after it moved to increase its exposure to the oil and gas market in spite of the crude price plunge.

The Glasgow-based engineering giant announced it was buying America's Delta Industrial Valves for up to $47 million, in a deal that will help increase its presence in the oil sands market.

The company has made the move although the downturn in oil and gas market activity in areas such as North America has weighed on trading this year.

On 9 June, Weir Group said the second quarter was proving to be very challenging in oil and gas.

Investment in new projects in the oil sands heartlands of Canada is expected to fall sharply in response to the slump in the crude price since June last year.

Producing oil from sands involves hefty upfront investment, meaning projects may struggle to make money if crude remains at around $60 per barrel.

Shares in Weir Group closed down five per cent after the company announced the takeover yesterday, suggesting investors were not enthused about the deal.

However, the Delta acquisition provides a clear indication Weir's directors still believe the company's strategy of using acquisitions to bulk up in oil and gas markets makes sense.

The group's director of strategy and corporate affairs, Andrew Neilson, said the company always assesses acquisitions with expected long term market developments in mind.

Noting that Delta earns around a third of its revenues from oil sands customers, he said the firm could benefit for years from the surge in activity recorded in the North American market before the crude price peaked in June last year.

Most oil sands developments are expected to be in production for 20 to 30 years. Delta has supplied thousands of valves for use on such assets. With the valves needing to be maintained, and then likely to be replaced every five years or so, Delta can expect to enjoy a strong stream of recurring income.

Weir's chief executive Keith Cochrane said the Delta acquisition would help the firm capitalise on oil and gas firms' efforts to cut costs in response to the downturn.

He said: "Delta's strong brand and reputation, together with Weir's global capability, mean we will be able to offer our customers new ways to increase efficiency at a time when the industry is focused on reducing costs and increasing productivity."

The downturn has put pressure on the share prices of firms that are exposed to oil and gas, including Weir Group.

However, it has also created opportunities for firms with access to cash to cut deals at attractive prices.

Mark Johnson, vice president of Michigan-based Delta, highlighted the appeal for the company of becoming part of a group which is much bigger and has a wide geographic reach.

He said: "Delta will be able to take advantage of Weir's presence in more than 70 countries ... We see significant opportunities ahead in what remain long-term growth markets."

Mr Neilson noted Delta also had a strong position in the mining business.

In October last year Weir Group increased its exposure to the international mining and aggregates businesses through the acquisition of China's Trio Engineered Products for around £140m.

Weir Group will pay $21m cash for Delta initially.

The vendors have agreed to accept a further $16m in Weir Group shares.

Weir will pay a further $10m cash over the next 18 months if Delta meets profit targets.

Weir Group said the transaction will boost earnings immediately. It added: "Post-tax returns (before integration costs) are anticipated to exceed Weir's cost of capital in the first full year of ownership."

Shares in Weir Group closed down 84p at £15.82. That left the firm with a market capitalisation of £3.4 billion.

Weir Group described Delta as a leading US-based manufacturer of knife gate valves for the mining, oil sands and other industrial markets.

Knife gate valves can be used to cut through rock and seal the section exposed.

Delta employs around 70 people. It generated earnings before interest, depreciation and amortisation of around $6.2 million over the last twelve months.