Having weathered the global crude oil price storm – during which its revenues slumped by more than 20% – Glasgow-based Weir Group has now swooped to buy KOP Surface Products for £89m in cash.
Based in Singapore, KOP employs 450 people and is a provider of wellheads, surface trees, valves, actuators and aftermarket services for the global oil and gas industry.
In addition to a manufacturing facility in Indonesia, KOP also has a network of sales and service offices in Malaysia, Thailand, Vietnam, Qatar, UAE, Saudi Arabia and India.
The present management team at KOP – hitherto owned by Akastor, the Norwegian-listed oilfield services group – will continue to lead the business, albeit now reporting into Weir’s Oil & Gas division.
Kristian Røkke, Chief Executive of Akastor. “Weir is an ideal owner of KOP and is well positioned to take the company to the next level.”
In the three years to December 2016, KOP generated an average of $117m in annual revenues. This year, revenue is expected to drop to about $46m, which Weir said reflected “current international oil and gas market conditions”.
Jon Stanton, Weir Group chief executive, said: “KOP is a great company with a strong management team that we have admired for some time.
“It is a natural fit for Weir and extends our range of wellhead and other pressure control solutions.
“KOP’s position in Asia also complements Weir’s leading presence in North America and the Middle East and means our group is in an even stronger position to benefit as oil and gas markets recover in the future.”
City analysts welcomed the bold move by Weir Group.
Philip Barker, partner and Head of Industrials at Cavendish Corporate Finance, commented:
“Weir’s acquisition of KOP Surface Products indicates Weir Group’s bet on the recovery of the oil market and solidifies them as a global, engineering powerhouse in the oil and minerals sector.
“Weir Group was no stranger to the oil price collapse in 2014 that saw weak demand and low prices, seeing a 21% drop in revenues in 2015. As oil prices beginning to somewhat recover, we can assume that the Weir has been patiently waiting to make such a strategic acquisition that will help to increase their assets and build their portfolio in a cost effective way over the long term.
“With the overall market stabilising and upstream activity in Asia showing recent signs of revival, this acquisition firmly cements Weir Group’s position as global leaders in manufacturing for the oil and gas sector.”