28 May 2014 07:01

Statement re Metso Corporation

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA OR JAPAN OR ANY JURISDICTION WHERE TO DO SO WOULD VIOLATE THE LAWS OF THAT JURISDICTION

On 20 May 2014, the Weir Group PLC ("Weir") submitted a revised indicative all share acquisition proposal (the “Proposal”) to the Board of Metso Corporation (“Metso”).

Weir proposed an all-share exchange offer under which Metso shareholders would have received 0.95 Weir shares per Metso share, a 13% increase to the 0.84 exchange ratio initially proposed by Weir. The Proposal valued each Metso share at €30.49 . This represented a 34% premium to Metso’s undisturbed share price of €22.75 on 26 March 2014, the day prior to the submission of Weir’s initial proposal to Metso. Assuming full acceptance of the offer Metso shareholders would have owned approximately 40% of the combined group and would have benefited from 40% of the value of synergies arising from the combination as well as 40% of the combined group’s future growth.

Based on public information, Weir estimates that the combined group could achieve annual run rate cost savings across both Weir and Metso of at least £150m per annum once fully implemented. Assuming full acceptance, and including the value of synergies the Proposal represented a total value to Metso shareholders of approximately €35.98 per share , a premium of 58% to Metso's undisturbed closing share price of €22.75 on 26 March 2014, the day prior to the submission of Weir’s initial proposal to Metso. Weir also expected further value upside for both sets of shareholders from enhanced revenue growth.

Weir also proposed a special dividend payable to all shareholders in the combined group post-closing equivalent to €2.13 per share in cash to a Metso shareholder, assuming full acceptance of the offer. It was Weir’s intention that the combined group would have been listed and index included on the Stock Exchanges of both Helsinki and London.

The Board of Metso did not engage with Weir and on 27 May 2014 rejected the Proposal, based on its belief that the market does not fully value the prospects of Metso and that the Proposal significantly undervalues Metso.

Weir believes it made a compelling proposal but remains financially disciplined and therefore does not intend to pursue this opportunity further at this time.

1 Proposal value per Metso share based on a Weir closing share price of £26.04 and a £/€ exchange rate of 0.8113 as of 27 May 2014

2 Assuming Metso fully diluted share count of 150.3m

3 Synergy value per Metso share of €5.49 based on £150m of annual run rate cost savings (approximately €185m assuming a £/€ exchange rate of 0.8113), taxed at a blended tax rate of approximately 29%, capitalised based on an illustrative P/E of 15.7x, and assumes Metso shareholders own 40% of the combined group

4 Special dividend value per Metso share of €2.13 based on a total proposed special dividend of €800m, full acceptance of the all-share exchange offer by Metso shareholders, settled in shares, and assumes Metso shareholders own 40% of the combined group

Enquiries:

The Weir Group PLC
Raymond Buchanan, Group Communications, Tel: + 44 141 308 3781 / + 44 7713 261 447
Ross Easton, Communications Manager, Tel: +44 141 308 3779 / +44 7920 190 994

Brunswick Group
Patrick Handley/Nina Coad, Tel: + 44 207 404 5959

Bank of America Merrill Lynch
Peter Luck, Tel: +44 207 995 6429
Philip Noblet, Tel: +44 207 995 2551

Merrill Lynch International (“Bank of America Merrill Lynch”), a subsidiary of Bank of America Corporation, is acting exclusively for The Weir Group in connection with its merger proposal and for no one else and will not be responsible to anyone other than The Weir Group for providing the protections afforded to its clients or for providing advice in relation to the merger proposal.