Wednesday 16 April 2014

Metso back under the spotlight - again!

I see Finnish engineering company Metso has today rejected Weir Group's £8.5 billion all-share merger proposal. Not much of a surprise there following last week's shenanigans on Betaville.

Weir Group said in its statement that it had offered 0.8400 shares per Metso share to the Finnish company's board.

If you use both companies' share prices from the day before the initial leak announcements, Weir Group's offer is pitched at about an 8pc premium valuing each Metso share at around Euro 25.70.

I suspect the FTSE 100-listed business will have to offer some cash (as I suggested last week on Betaville) and possibly at a higher level to convince Metso's board to recommend a deal to its shareholders.

Obviously, Weir Group could offer Metso shareholders a bit of cash sweetener but these investors would likely get a smaller stake in the new company.

Or, Weir Group could pay its own shareholders a special dividend before any merger deal to shrink its market capitalisation so it merges with Metso on a more equal footing. Clearly, this option doesn't give Metso's shareholders any cash but does bring a cash element to the overall transaction.

The question is - what does the Metso board want?

No comments:

Post a Comment