Metso's makes heavy mining equipment such as this grinding mill operated by a Swedish mining company

Weir abandons Metso merger after second rejection

Scottish engineering firm Weir Group has abandoned efforts to acquire rival Metso after it rejected a second, improved takeover bid.

The Finnish company said today that the latest offer that valued it at around £3.7bn – a roughly 20 per cent increase on an April bid – undervalued the firm as it has a bright future as a stand-alone company.

Weir said Metso shareholders would have owned around 40 per cent of the combined entity and the two firms would have made at least £150m in annual cost savings as a joint group, but the Scottish firm reported that the Metso board "did not engage" on this second proposal.

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

A deal would have helped Weir expand further into the heavy mining equipment sector, in which Metso is a market leader. The Scottish firm is keen to expand its mining business after years of strong growth in its oil and gas division, which has seen profits triple since 2009.

But Metso rejected the offer on Wednesday, saying it did not benefit the firm.

"We believe that Metso has a real opportunity to create significant value for all its shareholders by pursuing its own course and that the proposal from Weir significantly undervalues this opportunity and that a takeover by Weir at these conditions would not be in our shareholders' best interests," said board chairman Mikael Lilius.

Weir 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's improved bid of 30.49 euros per share was made on May 20 and represented a 34 per cent premium to Metso's share price on May 26, the day before the bid was rejected.

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