Bottom Line: Weir’s bold deal is already rolling downhill

 
Marion Dakers

BLENDING rock-crushers with oil pipes could be an unwieldy combination, but a merger between Weir and Metso would help both firms ride out any tremors in the global economy, which have prompted Weir to issue two profit warnings in as many years.

Both companies have been shifting their focus to services while industrial companies trim their capital spending on equipment, and diversity would further protect them from the patchy return to investment.

An all-share merger is Weir’s preferred format, which will relieve investors in the London-listed firm. Analysts at Canaccord reckon Weir, with a market cap of £5.4bn, would need to raise a whopping £2.3bn and leverage itself to 2.5 times earnings to make an attractive takeover offer.

Weir has already made smaller acquisitions in the rock-bashing business, signing a licence with equipment maker KHD and launching a range of crushers and screens that brought in £30m last year – one of the few parts of the firm that posted double-digit growth.

These benefits are of little comfort for shareholders in Metso, including the Finnish sovereign wealth fund, which bristled at the thought of a deal yesterday. Metso executives have takeover ambitions of their own, having slimmed down the firm by spinning off the power and paper arm in January.

To try and force a tie-up, against Finnish opposition, sadly looks like forever pushing a boulder up a hill.

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