Pumps and valves engineer Weir (WEIR) has made an indicative all-share offer for Finnish peer Metso Corporation (FI: MEO1V), rumoured to be worth €30 per share, or nearly €4.4bn (£3.6bn). That’s over nine times forecast cash profits; not excessive, but the City isn’t sure.
Metso shares surged by a fifth to €29, but Weir’s fell 3 per cent. While the all-share nature of the proposed deal removes the immediate need for a fundraising, a cash sweetener might be required to win over Metso shareholders. A rival bidder could also emerge. Still, a deal would provide both a boost to earnings and save €300m of costs, says broker Canaccord Genuity. Cross-selling opportunities are attractive, too - Metso makes most of its money selling grinding mills, crushers, pumps and filters to miners and construction companies.
