Metso influential state shareholder rejects Weir’s all-share merger proposal

Scottish pump and drilling equipment maker Weir Group's plan of acquiring Metso Oyj has run into trouble after its Finnish rival's influential state shareholder rejected the takeover.

Glasgow-based Weir, which has recently gone on an acquisition spree, yesterday tabled an unsolicited all-share merger offer to Metso without disclosing the price that is speculated to be at around 10 per cent premium to Metso's recent share price, valuing the Helsinki-based company at more than £3.3 billion (See: Scotland's Weir Group eyes $5.5 bn buyout of Finnish rival Metso Oyj).

Under the deal, Metso shareholders would hold 40 per cent of the new company.

The combined company would have a market cap of around $14.8 billion and annual sales of $9.3 billion.

Without revealing details of its proposal, Weir said in a statement, ''Weir confirms that it has made an indicative all share merger proposal to the board of Metso. The board of Weir believes that there is a strong strategic rationale for bringing the two companies together which would offer the opportunity for significant efficiencies and synergies, creating significant value for all shareholders.''

Metso confirmed that it has received an unsolicited merger proposal from Weir, but said that it is in the process of weighing the proposal, and added that it is currently not in talks with Weir.

Kari Jarvinen, managing director of Finland's state investment fund Solidium, which owns 11 per cent of Metso, rejected the takeover proposal and said that Metso has a bright future as an independent company.

''I don't think this is the right time to sell Metso to Weir Group, or to sell it to anyone,'' said Jarvinen.

Other major shareholder of Metso is Swedish activist investor Cebian Capital, whose co-founder Christer Gardell is on Metso's board.

Founded in 1999 through the merger of Valmet, a paper and board machine supplier, and Rauma, which focused on fibre technology, rock crushing and flow control solutions, Metso is a supplier of technology, automation and services to the mining, construction, and oil & gas industries.

In 2013, Metso split into two companies, Metso Corporation's Mining and Construction business and Automation business formed the new Metso Corporation and Metso's Pulp, Paper and Power business formed a new independent company under the name Valmet Corporation.

Metso has around 16,000 employees and reported net profit of $429.8 million in 2013 on sales of $5.3 billion.

Founded in 1871, Weir, an FTSE 100 company, is a global provider of engineering solutions to the minerals, oil and gas and power sectors.

With a global network of more than 140 manufacturing facilities and service centres, its customers include the world's largest mining houses, major oil services businesses and nuclear and conventional power generation companies.

In 2013, the company reported revenues of more than £2.43 billion and profit before tax of £418 million. It has net debt of £747 million.

A closed Metso deal would be the latest in a series of acquisitions done by Weir recently.

In 2010, it acquired Malaysian mining services group Linatex, and acquired the Rs1.52-crore valves business of Karnataka-based privately-owned BDK Engineering Industries Limited.

In 2012 it took a majority stake in a South Korean valves business, and acquired Texas-based wellhead specialist Seaboard Holdings for $675 million, in order to expand its presence in the booming North American shale gas market.

It also spent £200 million in buying Australian mining equipment maker Ludowici.