Finland's Metso has spurned a merger approach from rival engineering firm Weir, dashing hopes of boosting its mining equipment business.
The Scottish firm’s plan, which would have valued Metso at around a €4bn (£3bn), ran into trouble shortly after it emerged on April 1 that the Finnish state investment fund opposed a takeover.
A deal would have helped Weir expand further into the crushing segment of the mining equipment industry, where Metso is a market leader, but it said there was no certainty it would improve the proposed offer.
"The board of directors ... has come to the unanimous conclusion that this proposal is not in the best interest of shareholders," Metso said in a statement, adding it saw no reason to commence talks with Weir.
Weir is keen to expand its mining arm after years of strong growth in its oil and gas division, which has seen profits triple since 2009. The company sits in a crowded mid-sized industrial sector which industry insiders say is ripe for consolidation in order to provide a wider range, and a greater scale, of equipment and services to cost-conscious clients.
Bankers have said a failure to merge with Metso could make Weir, already frequently the subject of takeover speculation, a target for big players such as General Electric or Honeywell that are keen to access the Glaswegian company's lucrative position in US shale.
Weir said today it believed its all-share proposal to create an £8.5bn engineering giant – in which Metso would have received about 37 per cent of the new company – would have had significant benefits.
"The Board of Weir believes that it has made an attractive merger proposal and there is no certainty that it will revise the terms of its proposal," it said in a statement.
A source had earlier told Reuters that Weir offered Metso a 5 to 10 per cent premium over its recent share price. Weir confirmed it had proposed that the combined company would have a strong presence and listings both in Finland and Britain.
That was not enough for the Finnish state, which owns 11 per cent of Metso and insisted the company could flourish alone. Metso spun off its paper machine business Valmet at the start of 2014, basically halving the size of the company.
"The Metso Board remains extremely positive and confident in Metso's standalone growth and value creation prospects by pursuing its current strategy," the company said.