Construction and mining equipment manufacturer Caterpillar Inc (CAT) announced the acquisition of the Oil & Gas Division of Scotland-based engineering company Weir Group PLC (WEGRY), for $405 million in cash, on Monday.

"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," Caterpillar VP for Oil & Gas and Marine Division Joe Creed said.

What Happened: The all-cash acquisition deal for Weir Oil & Gas includes 40 manufacturing and services locations and approximately 2,000 employees. The transaction is subject to regulatory review and approval of Weir stakeholders.

Caterpillar has engaged Morgan Stanley & Co. LLC (MS) as the exclusive financial advisor.

Why Does It Matter: The Oil and Gas sector took a beating after crude prices fell sharply due to a drop in demand worldwide.

According to Moody’s Investors Service, oil prices would fluctuate between $40 and $45, ushering a stable outlook through 2021. Although, it notes that the industry will not be able to generate positive free cash flow in the next 12 months.

Last week, Noble Energy Inc (NBL) merged with Chevron Corporation (CVX) in an all-stock deal, which is expected to close in the fourth quarter of the year.

Devon Energy Corp (DVN) and WPX Energy Inc (WPX), also announced a merger in the last week of September, to create a leading unconventional oil producer in the U.S. Both companies will create a new entity with a combined valuation close to $12 billion.

Price Action: CAT shares gained 2.2% on Friday to close at $149.94. WEGRY shares gained 1.25% on Friday to close at $8.51.