Scottish engineer Weir Group said yesterday it had approached Finnish rival Metso about a multibillion-pound takeover, but a deal could be thwarted by a government-backed investment fund.
Weir, which sells pumps and valves for the mining and oil and gas industries, has proposed an all-share deal believed to be worth more than £3billion.
It would give Metso shareholders a combined stake of about 40% in an enlarged group worth in excess of £8.5billion.
But Finnish state investment fund Solidium, which has an 11% stake in Metso, said it opposed a takeover.
Solidium managing director Kari Jarvinen added: “Metso has an excellent path in front of it as an independent company, so I don’t think this is the right time to contemplate selling the company.”
Metso shares were up nearly 20% yesterday, suggesting investors still believed some kind of deal was possible. But one hedge fund investor who closely follows Finnish deals said such a public rebuttal by the state fund appeared to have stopped any deal in its tracks.
A London-based Finnish analyst agreed, saying: “I think it’s quite a strong comment and I’m surprised the market hasn’t reacted to it.
“What the market maybe misses a little bit is that Metso is the backbone of Finnish industries. It has a pretty important supply chain and there is in the investor base a lot of retail investors.”
Glasgow-based Weir, which has more than 15,000 employees in 70 countries, said its approach for Helsinki-listed Metso had “strong strategic rationale”. It is thought FTSE 100 Index-listed Weir is prepared to pay up to £25 a share for the business in a takeover it said 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”.
Analysts at financial services group 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% of combined group sales.
“A deal would make considerable sense with scope for substantial synergies,” they added.
Recent annual results showed Weir’s pre-tax profits fell 5% to £418million 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% rise in the second half.
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