* Second offer valued Metso at about 4.5 billion euros
* Metso said bid undervalued company
* Scotland's Weir keen to expand its mining business
* Bankers have said Weir itself could become takeover target
(Adds Weir CEO quote)
By Ron Bousso
LONDON, May 28 Scottish engineering firm Weir
Group abandoned efforts to acquire rival Metso
after the Finnish company rejected a second, improved
Metso said on Wednesday that the latest offer - which valued
it at around 4.5 billion euros ($6.13 billion), up by around 20
percent from an April bid - undervalued the firm as it has a
bright future as a stand-alone company.
Weir said Metso shareholders would have owned around 40
percent of the combined entity and the two firms would have made
at least 150 million pounds in annual cost savings as a joint
"The most disappointing thing was that the offer in itself
wasn't enough for anyone from Metso to engage with us," Weir
Chief Executive Keith Cochrane told Reuters.
"I am sure they have good reasons for coming to that
conclusion. We will only do deals at the right price and
therefore we are moving on - and very much, from our
perspective, this deal is over," he said.
A deal would have helped Weir expand further into the heavy
mining equipment sector, in which Metso is a market leader.
The Scottish firm is keen to expand its mining business
after years of strong growth in its oil and gas division, which
has seen profits triple since 2009.
But Metso rejected the offer on Wednesday, saying it did not
benefit the firm.
"We believe that Metso has a real opportunity to create
significant value for all its shareholders by pursuing its own
course and that the proposal from Weir significantly undervalues
this opportunity and that a takeover by Weir at these conditions
would not be in our shareholders' best interests," said board
Chairman Mikael Lilius.
Weir sits in a crowded mid-sized industrial sector which
industry insiders say is ripe for consolidation in order to
provide a wider range, and a greater scale, of equipment and
services to cost-conscious clients.
Bankers have said a failure to merge with Metso could make
Weir, already frequently the subject of takeover speculation, a
target for big players such as General Electric or
Honeywell that are keen to access the Glaswegian
company's lucrative position in U.S. shale.
Shares in Weir group were trading 0.5 percent higher at 0915
GMT, while Metso shares were down 3.34 percent.
Weir's improved bid of 30.49 euros per share was made on May
20 and represented a 34 percent premium to Metso's share price
on May 26, the day before the bid was rejected.
The new proposal included a special dividend payment to all
shareholders of the combined group of 2.13 euros per share.
Weir's initial approach for Metso was for around 25.6 euros
($1 = 0.7345 Euros)
(Reporting by Sarah Young, Karolin Schaps and Ron Bousso in
London, and Jussi Rosendahl in Helsinki; Editing by Pravin Char)