Weir Group abandons $6.3 bn merger with Finland’s Metso Corp

Scottish pumps and drilling equipment maker Weir Group abandoned plans to buy Metso Oyj, after the Finnish engineering firm rejected its revised $6.3 billion offer.

Glasgow-based Weir said that on 20 May it submitted a revised indicative €30.49 all share acquisition proposal, a 13-per cent increase to its earlier offer.

Under Weir's revised all-share offer, Metso shareholders would have received 0.95 Weir shares per Metso share, up by 13 per cent to the 0.84 exchange ratio initially proposed by Weir.

The latest offer valued each Metso share at €30.49, a 34 per cent premium to Metso's share price of €22.75 on 26 March 2014, the day prior to Weir tabling its initial offer.

Under the deal, Metso shareholders would have held 40 per cent of the new company, which would have a market cap of around $14.8 billion, annual sales of $9.3 billion and achieved synergies of at least £150 million annually.

Weir said in a statement, "The board of Metso did not engage with Weir and on 27 May 2014 rejected the proposal, based on its belief that the market does not fully value the prospects of Metso and that the proposal significantly undervalues Metso.

"Weir believes it made a compelling proposal but remains financially disciplined and therefore does not intend to pursue this opportunity further at this time," the statement added.

Kari Jarvinen, managing director of Finland's state investment fund Solidium, which owns 11 per cent of Metso, had earlier 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 successful Metso deal would have been the latest in a series of acquisitions by Weir recently.

In 2010, it acquired Malaysian mining services group Linatex, and purchased 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.