Weir sweetened its all-paper offer from 0.84 shares to 0.95 shares and added a special dividend payable to all shareholders in the combined group (on completion of the deal) equivalent to €2.13 per share.
The revised offer represented a 13% premium to the initial offer and a 34% premium to the pre-offer price (before assumed synergies) but was not enough to convince Metso management who argued the bid still failed to fully value their company's prospects. Citing financial discipline Weir has now opted to walk away.
An update on the group's forward strategy and future M&A plans may be forthcoming at next month's (17 Jun) capital markets day.
In response to today's news Liberum reiterates its hold recommendation and £25.00 price target. It comments: 'Management are exploring acquisition targets, large and small, across all three divisions. We venture that a tie-up with a fellow flow control engineer like IMI (IMI) or Sulzer (SUN:VTX) could be viable, especially given complementary product ranges.
'Taking Net Debt / EBITDA to 2.5x (covenant 3.5x), we estimate that Weir has c.£800 million of acquisition headroom before it would need to raise equity.'