Deals



Acquisition of Mathena, Inc Broadens pressure control offering across upstream oil and gas markets


Posted: 20th December 2012 09:59

The Weir Group PLC ("Weir") has agreed to acquire Mathena, Inc ("Mathena"), a leading provider of pressure control rental equipment and services for onshore oil and gas drilling applications.  Consideration will be via an initial payment of US$240m (£148m[1]) with a maximum deferred consideration of US$145m payable over two years, contingent upon meeting profit growth targets.  The effective acquisition profit multiple will be reduced as a result of these payments.  The goodwill on acquisition will be tax deductible, with the net present value of the cash tax benefit related to the initial payment expected to exceed U$40m.  The acquisition will be funded from existing bank facilities with forecast Weir 2012 proforma net debt to EBITDA[2] of c.1.5x.  Based on Q4 2012 estimates, Mathena's forecast annualised 2012 EBITDA[2] is US$49m.  

Mathena manufactures a range of pressure control products including hydraulic chokes, mud-gas and shale-gas separators including proprietary technology for fluid separation and containment designed to meet the increasing environmental and safety requirements of shale drilling.  In addition to its manufacturing expertise, Mathena differentiates itself through a strong customer service culture, product innovation and the ability to offer complete bespoke rental and service packages.  The acquisition will increase the aftermarket focus of Weir Oil & Gas with approximately 80% of Mathena's revenues generated from equipment rental and 20% from related parts and service.

The acquisition is a strong strategic fit with Weir Seaboard in the pressure control market and supports the expansion of Weir's flow back services.  Mathena further balances exposure between the Oil & Gas division's pressure pumping and pressure control operations and enables Weir to:


Mathena accelerates Weir's strategy of creating a Tier-1 provider of surface pressure control equipment and services to upstream onshore unconventional markets. In addition to extending Weir's addressable market by over US$500m, the business expands Weir's presence in the large US drilling market and broadens its pressure control customer base.  The purchase meets Weir's acquisition criteria and will be immediately earnings accretive with post tax returns expected to exceed Weir's cost of capital within the first full year of ownership.
The Mathena management team will remain with the business and are incentivised as part of the earn out structure. Subject to US regulatory approvals, completion of the acquisition is expected on 31 December 2012.

Commenting on the acquisition, Weir Chief Executive, Keith Cochrane, said: "Mathena is a well-regarded business in the US upstream oil and gas markets, with a strong management team and market share in the pressure control drilling markets.  This deal is a close strategic fit with our existing pressure control business and gives us a larger suite of products which we can sell to the expanded customer base. The business has strong growth potential and increases our exposure to shale oil and gas, markets with attractive long term structural growth prospects."

Mathena President and CEO, John Mathena, said: "Through joining the Weir Group, I believe that Mathena can continue to develop as a business committed to innovation and service in one of the world's most exciting energy markets."

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