By Marcus Leach

The Weir Group PLC has agreed to acquire Novatech LLC, a US manufacturer of well service pump valves and valve seats for upstream oil and gas applications, for $176 million (£113 million) in cash.

The consideration will be funded from existing bank facilities. The acquisition is in line with Weir's acquisition criteria and is expected to be immediately earnings accretive with post tax returns expected to exceed Weir's cost of capital within the first full year of ownership. Subject to US regulatory approvals, completion of the acquisition is expected in February 2012.

Based in Dallas, Texas, Novatech, a family-owned business, produces a wide variety of proprietary valves and valve seats for high pressure applications such as frac, cement and mud pumps used in unconventional upstream oil and gas operations.

The business is well known to Weir, being a long standing local supplier to Weir SPM. Novatech achieved proforma revenues and EBITDA2 of US$61.6m and US$25.2m respectively3 for the most recent fiscal year ending 30 September 2011, with associated annual revenue growth of 88%. Positive trends continued in the final quarter of calendar 2011. Approximately 90% of revenues are generated from aftermarket demand.

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