Caterpillar said Monday it has agreed to buy the oil and gas division of Scotland’s Weir Group for $405 million, making a bet on the energy sector amid a slowdown in demand for its heavy equipment.

The deal covers more than 40 Weir Oil & Gas manufacturing and services locations and about 2,000 employees. Weir, which is known for heavy-duty valves and pumps, has been seeking to reduce its exposure to the volatility of hydrocarbon markets and focus on its core mining equipment business.

Caterpillar’s shares rose 2.3% to $153.35 on news of the all-cash acquisition.

“Combining Weir Oil & Gas’s established pressure pumping and pressure control portfolio with Cat’s engines and transmissions enables us to create additional value for customers,” Joe Creed, vice president of Caterpillar’s oil0 & gas and marine division, said in a news release.

“This acquisition will expand our offerings to one of the broadest product lines in the well service industry,” he added.

Caterpillar’s equipment sales have been sagging due to the effects of the coronavirus pandemic, with all three of its business segments seeing declines in the most recent quarter. Construction sales fell 37%, mining revenue was off 35% and energy and transportation revenue slid 24%.

The company said the acquisition of Weir Oil & Gas was “consistent with Caterpillar’s strategy to invest for long-term, profitable growth through operational excellence, expanded offerings and services. Caterpillar is taking advantage of its strong balance sheet to complete this acquisition that supports the enterprise strategy.”

According to the Financial Times, Weir “thrived on the back of the commodities boom that began in the early 2000s, but from the middle of the last decade felt the chill wind of the slowdown that followed.”

“In more recent times, the company has been hit by its exposure to the North American shale sector, with demand for oil falling sharply since the start of the year,” the FT added.

In trading Monday, Weir’s shares climbed 22.5% to 1,568 pence.

Jefferies analyst Andy Douglas said the deal removes a “problem child,” leaving Weir with a “very strong” business.

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