WEIR Group chief executive Keith Cochrane's ambitious takeover play to create an £8.5 billion engineering group by linking up with a Finnish rival has been dealt an early blow.
Mr Cochrane has fired the starting gun on what could be the company's biggest ever deal but the approach for Metso has already been resisted by Finland's state-owned investment company. Solidium has an 11% stake in Metso with its interest in the company stretching back to 1946.
Kari Jarvinen, Solidium managing director, said: "Metso has an excellent path in front of it as an independent company, so I don't think this is the right time to contemplate selling the company.
"I don't think this is the right time to sell Metso to Weir Group, or to sell it to anyone."
That came after the Glasgow engineering giant formally confirmed it has made an all share approach for Finnish firm Metso.
While no financial details of the proposal were released market speculation suggested Weir, which has a market capitalisation in excess of £5bn, is willing to pay the equivalent of around €30 a share, which would value Metso at £3.3bn.
It is thought likely shareholders in the Scottish company would retain about 60% of the enlarged business.
The businesses work in similar sectors, including mining, energy, industrial and construction, but have different specialisms so a tie-up would lead to more opportunities to cross sell greater volumes of products to customers.
Along with the wider scale and the likely synergies the move can be seen as something of a pre-emptive defensive measure with the additional size likely to give Weir greater protection from being swallowed up by even bigger operators in the sector. GE, Siemens and Caterpillar are among those which have been linked with a possible bid for Weir in the past.
In a statement to the stock market Weir said: "The board of Weir believes that there is a strong strategic rationale for bringing the two companies together which would offer the opportunity for significant efficiencies and synergies, creating significant value for all shareholders."
Weir said if a deal went ahead the business would be dual listed on the London and Helsinki stock exchanges. Metso, which employs 16,000 people in 50 countries, confirmed it had received an "unsolicited" approach and added: "Metso occasionally receives these types of proposals and, in case the board of directors of Metso considers them serious, evaluates such proposals.
"Contrary to market rumours, Metso is currently not and has not been engaged in discussions with Weir although it is in the process of considering Weir's proposal."
Metso's biggest geographical markets are the US, Brazil, Australia, China and Russia.
It had net sales of €3.8 billion in 2013, down from €4.28bn in 2012, while operating profits dipped from almost €458 million to €423 million.
However the pulp and paper machine division was spun out into a separate entity, named Valment, in January this year.
Analysts suggested that move, which reduced the size of the business, had made Metso more attractive to potential buyers.
However Juha Kinnunen of Inderes Equity Research said: "I think the deal would have to be some kind of a merger, not a straightforward acquisition by the Weir Group.
Canaccord Genuity's Harry Philips was also upbeat on the strategic reasons for the deal and suggested synergies of up to €300 million.
He said: "We think a deal would make considerable sense with scope for substantial synergies.
"It would broaden Weir's mining product platform into comminution (crushing) to build on its strong pumps position.
"The prospect of the deal also indicates the ringing of the bell in terms of mid-cap industrials, the jacks in the land of the giants, starting to use their balance sheets to develop their global platforms and generate considerable synergies through cost reduction."
Weir shares closed down 18p, or 1%, at 2518p while Metso was up 19% to €28.34.