THERE is no certainty that Weir Group will pull off its tie-up with Finnish group Metso and a strong possibility that others may gatecrash its plans.
Metso is an attractive proposition and has already drawn attention from other potential suitors. Weir has signalled that it needs a deal to maintain its place in a consolidating sector.
There are no talks as yet, only an indication from Glasgow-based Weir that it is interested in a deal. It is probable that, with its hand now shown, Metso could push up the asking price. It will then come down to who has the will to proceed and whether the numbers still stack up.
Weir may be termed a Scottish engineering giant but in fact makes nothing in Scotland. The only operational plant now is geared to the aftermarket in which it shares a dominate role with Metso.
It sees growth in the mining business and a deal with the Helsinki-based company would strengthen its position in this market.
According to one analyst it would require a £2.3 billion rights issue and on growth and synergy prospects it is likely to be well supported assuming it can persuade Metso shareholders to sell, and that looks a tough call.
Fallon deserves credit for Royal Mail float
THERE is little doubt that the UK government sold the Royal Mail cheaply. Whether it was a result of incompetence, caution or a deliberate move to allow ordinary retail investors to benefit from the subsequent rise in the share price is a matter for some debate.
The National Audit Office says it was sold too cheaply, an important distinction. It accuses the government of short-changing the taxpayer. The shares soared 38 per cent on the first day of trading meaning the government could have raised a further £750 million.
Business minister Michael Fallon insists that institutions would not have bought in for more than the 330p-a-share strike price, a statement that suggests the institutions themselves were either being too cautious, or else pulling the wool over someone’s eyes.
On balance there has to be some sympathy for Fallon. Advice was taken and acted upon. Had the price been fixed too high there was a risk that the issue would have been a flop, prompting criticism of a different kind.
This flotation was successful. Fallon defied 20 years of trying and failing by both Conservative and Labour governments and most of all the resistance of a belligerent workforce prone to industrial action. There were always going to be questions about this most sensitive privatisation since the railways. Whether undervalued or not Royal Mail is now in the FTSE 100 listing of Britain’s biggest companies.
A case, therefore, of damned if you do, damned if you don’t.