July 13, 2020 / 7:22 AM / a month ago

UPDATE 3-Alfa Laval makes $2 bln bid for Finland's Neles, biggest owner sceptical

* Recommended cash bid at 11.50 EUR/share

* Neles shares rise 36%, above offer level

* Deal to boost Alfa in industrial valves

* Top owner Valmet says bid not in the interest of Neles (Adds comments from Valmet, Alfa Laval CEO, updates shares)

By Johannes Hellstrom and Tarmo Virki

STOCKHOLM/TALLINN, July 13 (Reuters) - Sweden's Alfa Laval announced on Monday a 1.73 billion euro ($1.96 billion) bid for valves maker Neles, but the Finnish firm's largest owner said the offer was not in the interest of the company, raising expectations of higher offers.

Neles shares jumped 36% to 11.79 euro by 1003 GMT, compared with the 11.50 euro per share cash bid from Alfa Laval.

Alfa Laval said its bid was recommended by the Neles board and conditional on at least two-thirds of shareholders accepting it. Neles' largest shareholder Valmet, with a 14.9% stake, gave it an early thumbs down.

"This is not in the interest of Neles or Neles' shareholders," Valmet CEO Pasi Laine told Reuters, adding the company saw Neles as a long-term investment.

Analysts said Valmet itself could be interested in taking over all of Neles, something Laine declined to comment on.

Neles, whose valves are used in industries ranging from oil and gas to pulp and paper, became an independent company just two weeks ago when its parent Metso's 2019 deal to merge its bigger minerals technology unit with Outotec was finalised.

Its second biggest shareholder Cevian Capital, with a 10.9% stake, said it backed the bid, which it viewed as an "attractive offer from a respected acquirer".

Alfa Laval, which also makes products such as heat exchangers and separators, said the deal would strengthen its presence in the large industrial valves market, which it sees as a key growth area.

Its shares were up 4% following the announcement.

"We see strong industrial logic in support of the deal as it fills a gap in Alfa's portfolio which today lack fluid handling within its energy division," said analyst Mattias Holmberg from DNB Markets.

CEO Tom Erixon told a conference call the company had for some time looked for an acquisition in the large industrial valves market to build on.

"When the decision was taken in the Metso board to put Neles as an industrial flow company on the stock exchange, that was a perfect fit for Alfa Laval," Erixon said.

($1 = 0.8824 euros)

Reporting by Johannes Hellstrom and Tarmo Virki and Tommy Lund; editing by Niklas Pollard and Emelia Sithole-Matarise

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