Weir-Metso merger could be 'very exciting', says Canaccord

1st Apr 2014 11:14

Canaccord Genuity has retained its 'buy' recommendation for engineer Weir Group on the back of a possible merger with Finnish peer Metso, saying that "this deal has the potential to be very exciting".Weir confirmed media speculation on Tuesday morning by saying that it has made an indicative all-share merger proposal to the board of Metso. No financial details were given but press reports suggest that it could pay £4bn for its rival.Canaccord said that the deal would broaden Weir's mining production platform into comminution (crushing) to build on its strong pumps position. "Our first thoughts are on a strategic basis, a deal would make considerable sense with scope for substantial synergies, but it would also need a substantial equity element to get the deal done whether it be through a merger or a rights issue to fund the transaction," said Canaccord analysts Harry Phillips and Rob Ellis."The prospect of the deal also indicates the ringing of the bell in terms of mid-cap industrials, the jacks in land of the giants, starting to use their balance sheets to develop their global platforms and generate considerable synergies through cost reduction - both operating sites and supply chain/procurement- and revenue synergies through cross selling their routes to market."However, they warned that there is a risk that the groups' "compelling nature" drags other parties into the fray.The stock was down 2.6% at 2,471p by 11:13.BC