Weir Group supplies pumps and valves to the oil and gas industry

Weir Group submits merger proposal to rival Metso

Scottish company Weir Group plans to merge with a Finnish rival to create an engineering giant worth more than £8.5bn.

The Glasgow-headquartered group, which has more than 15,000 employees across 70 countries, said its all-share approach for Helsinki-listed Metso had "strong strategic rationale", but Metso, which saw shares soar on the Nordic stock market after a report revealed the plans, said it was not currently in talks with Weir.

It said: "Metso confirms that it has recently received an unsolicited approach by Weir with a proposal for commencing discussions concerning a potential combination of the two companies."

It added: "Contrary to market rumors, Metso is currently not and has not been engaged in discussions with Weir although it is in the process of considering Weir's proposal."

Weir – whose clients include energy giant EDF, Toshiba and oilfield services group Schlumberger – is prepared to pay up to €30 (£25) a share for Metso, which would value it at more than €4bn, according to The Times.

Weir, which is a supplier of pumps and valves to the oil and gas industry, is valued at £5.3bn on London's FTSE 100 Index. It installs plant and parts for companies across the mineral, power generating and industrial sectors, while also handling service and maintenance contracts.

It said a merger between the two would "offer the opportunity for significant efficiencies and synergies, creating significant value for all shareholders".

The plans would see the group listed on both the London and Helsinki stock exchanges and Weir said it would make further announcements in "due course". Shares in Weir fell more than 2 per cent as investors digested the merger plans.

But analysts at Canaccord Genuity said the deal had the potential to be "very exciting", boosting Weir's mining business to see it make up more than 55 per cent of combined group sales.

"A deal would make considerable sense with scope for substantial synergies," they said.

It has performed well in recent years by providing parts to America's booming shale gas market. Recent annual results showed Weir's profits fell 5 per cent to £418m in 2013, but the group predicted a return to underlying growth this year as chief executive Keith Cochrane hailed growing momentum in its order book following a 12 per cent rise in the second half.

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