A merger between two of Europe’s leading engineering firms has been abandoned after a failure to come to an agreement over the terms of the deal. After months of speculation led to Scottish firm Weir approaching Finland’s Metso in April, it was announced this morning that a second offer had failed to gain approval.
Weir raised its offer this week by 20 percent to €30.49 per share, valuing Metso at roughly €4.5bn. However, despite this representing a premium of 34 percent on Metso’s share price on Tuesday, the board of the Finnish firm rejected the deal, saying it felt that the offer undervalued it.
[T]he board of the Finnish firm rejected the deal, saying it felt that the offer undervalued it
In a statement, Metso said, ‘Weir’s offer is made a time when the mining capital equipment business is at a low point in the cycle. The timing of the revised proposal is opportunistic given the relative position in the cycle of the respective end markets of Metso and Weir.’
The deal would have created an industry giant that would be able to secure a significant share of the manufacturing business being created by the mining of liquefied natural gas. Metso shareholders would have retained around 40 percent of the merged company, which Weir believe would have had a market capitalisation of £8.5bn.
Announcing the collapse of the deal, Weir said that it did not plan on continuing with a pursuit of Metso. ‘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.
The Scottish group added, ‘Weir believes it made a compelling proposal, but remains financially disciplined and therefore does not intend to purse this opportunity further at this time.’
Weir has been looking to boost its portfolio of oil, gas and mining equipment offerings in recent months, and recently announced a partnership with British firm Rolls-Royce so that it could secure a better share of the global fracking market.
Keith Cochrane, Weir’s CEO, said earlier this month that fracking equipment represented the industry’s next big evolution. “It’s about having the right product as the industry evolves, the right product for the next capex cycle and the ability to help our customers become more efficient,” he told the FT after announcing the deal.