Scottish engineering firm Weir has called off its pursuit of rock-crushing specialist Metso after revealing it had been rebuffed by the board of the Finnish group for a second time.
Glasgow-based Weir, which produces gear used in the oil and gas, mining and power industries, yesterday revealed it had upped its merger bid to value its European rival at 4.6 billion euros.
But the “compelling proposal” was rejected in Helsinki, with Metso also declining the chance to engage in talks with its suitor.
The revised proposal, which featured a 13% increase in the share exchange ratio proposed in April’s original 4.0bn euro offer, would have handed Metso shareholders 40% of an international giant with a total implied value of 11.5bn euros.
At 30.49 euros, Weir’s latest offer remained some way short of the 35 euros per share that had been touted as being required for success by analysts.
However, Weir said a combined group could achieve annual savings of at least £150 million, creating a total value per share of 35.98 euros after the cuts some 58% above Metso’s undisturbed close price of 22.75 euros in late March.
It also offered a 320m euro payout to Metso shareholders, through a 2.13 euro special dividend payable following the close of the deal.
Weir, headed by chief executive Keith Cochrane, said it would not up its offer again “at this time”.
“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 company said.
Metso, which is 11% owned by a Finnish government investment vehicle, said its board had given the latest proposal close consideration but concluded that the improved approach still undervalued the company following a “small” improvement in terms.
It has just demerged pulp, paper and power business Valmet, and said there were “significant” growth chances across all its core businesses.
While the mining equipment side is in a trough, Metso said there was room for improvement as the investment cycle returns to health.
The target said Weir’s approach was opportunistic, and it was making progress on an efficiency programme of its own.
“We have considered the approaches from Weir carefully and thoroughly,” said Metso chairman Mikael Lilius.
“We have also carefully considered the opportunities that Metso has as an independent company and its strong growth prospects.
“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.”
Stock in Weir closed the day down 20p at 2,584p, while on the Nasdaq Nordic index Metso ended the session more than 2% down at 28.43 euros.