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Weir Group in Asia takeover

Marion Dakers
ENGINEERING firm Weir Group agreed to buy Malaysia-based manufacturer Linatex for $200m (£138m) yesterday to help it grow in emerging economies.

The group will pay $172.5m (£119m) in cash and assume £27.5m (£19m) of debts from Linatex. The deal is set to close in the third quarter of this year, and the group expects the purchase to pay for itself by 2011.

Linatex, which makes rubber products for the mining and power industries, operates in Malaysia and China and employs 1,000 staff. It is currently owned by Navis Capital, a private equity group based in Kuala Lumpur.

Weir announced the news alongside a surprise trading update, which predicted significantly improved underlying profits of around £140m for the first half of 2010.

The Glasgow-based group, which makes industrial equipment for mining and oil production, posted a 22 per cent increase in orders during the first half of the year. It singled out particularly strong sales of oil-related products in the US.

Weir chief executive Keith Cochrane said: “Linatex’s established manufacturing capability, particularly in Malaysia and China, and its extensive customer network, provides an excellent platform for growth.”

He added: “We welcome Linatex management and employees to the enlarged group and look forward to a successful future together.”

Numis Securities maintained a “buy” recommendation with a target price of 1,200p, saying in a note that Weir’s balance sheet remains strong with potential for more acquisitions in the coming twelve months.

Its shares rose 12.2 per cent to close at 1,066p yesterday.