Engineering group Weir was facing a potential shareholder backlash to its hopes of expanding its presence in the mining market by merging with a Finnish rival in a deal that could create a business worth more than £8.5 billion.
The Glasgow-based firm made an unsolicited approach to Metso to propose an all-share merger of the two companies, with sources suggesting it could end up owning 60 per cent of the combined entity.
A tie-up would value Helsinki-based Metso – a maker of valves and rock-crushing machines – at more than €4bn (£3.3bn), although Weir stressed there was no certainty a deal will be agreed.
The head of Finland’s state investment fund Solidium, which owns 11 per cent of Metso, rejected a takeover of Metso, saying it had a bright future as an independent company.
“I don’t think this is the right time to sell Metso to Weir Group, or to sell it to anyone,” said Solidium managing director Kari Jarvinen.
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: “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.”
Analysts at Canaccord Genuity said a merger “has the potential to be very exciting” and would help Weir, which has benefited from the boom in America’s shale gas market, to expand its rock-crushing equipment business.
The broker said: “The key point beyond the strategic logic would be the synergies – instinct says at least €300m, which will make the maths even more compelling. The risk is that their compelling nature drags other parties into the fray.”
Weir has attracted the interest of American conglomerate General Electric, which has also been tipped as a possible buyer of Metso.
Following speculation that the two firms had been holding informal talks, Metso today confirmed it had received an approach from Weir, which employs 15,000 people in more than 70 countries.
“Metso occasionally receives these types of proposals and, in case the board of directors of Metso considers them serious, evaluates such proposals,” the company said in a statement to the Helsinki stock market.
“Contrary to market rumours, Metso is currently not and has not been engaged in discussions with Weir although it is in the process of considering Weir’s proposal.”
In response, Weir said it was seeking an all-share merger of the two companies, arguing that such a deal could create “significant value” for shareholders.
Weir, headed by chief executive Keith Cochrane, added: “The board of Weir believes that there is a strong strategic rationale for bringing the two companies together which would offer the opportunity for significant efficiencies and synergies.”
While Weir shareholders could control 60 per cent of the enlarged group, a source said the new company’s board would be staffed with executive from both companies.
Weir shares fell 18p or 0.71 per cent at 2,518p.