Weir Group Plc said on Oct. 5 it had agreed to sell its oil and gas division to U.S. heavy equipment maker Caterpillar Inc. for $405 million in cash, as the engineering company focuses on its mining business.

Shares of Weir surged 22.5% to 1,568 pounds, on track for their best day in more than 20 years.

The deal, which follows a collapse in global oil prices and a swathe of bankruptcies in the sector, will have a $70 million U.S. cash tax benefit for Weir, the company said.

In July, Illinois-based Caterpillar, considered a bellwether for economic activity, warned of continued sluggishness in equipment sales due to the coronavirus pandemic, with its main customers in highly cyclical businesses such as mining and construction.

In a separate statement on Oct. 5, Caterpillar said the deal covered more than 40 Weir Oil & Gas manufacturing and services locations and about 2,000 employees.

"This acquisition will expand our offerings to one of the broadest product lines in the well service industry," said Joe Creed, vice president of Caterpillar's oil and gas and marine division.

The transaction includes Weir's North American and international oil and gas operations, comprising its pressure pumping and pressure control business units, and associated after-market spares among other things.

Weir Group CEO Jon Stanton said the deal was a major milestone as the group transforms into a premium mining technology business.

The deal is expected to close by the end of the year and Weir said it would help strengthen its balance sheet for future investments.

Jefferies analyst Andy Douglas said the deal removes a "problem child," leaving Weir with a "very strong" business. He added that the price was higher than Jeffries had expected.

Weir said its oil and gas business had gross assets of 747.4 million pounds (US$966.61 million) at June 30.

(US$1 = 0.7732 pounds)

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