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Costain woos Mouchel with improved offer

By THIS IS MONEY
Updated: 06:50 EST, 6 January 2011

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Rejected suitor Costain has sweetened its proposal to outsourcing firm Mouchel Group with an offer now worth more than £150m.

Takeover proposal: Costain says combined group would have an order book of more than £4bn

The construction group's all-share approach is 27.6% higher than the one rebuffed by the Mouchel board in December.

Costain said that the deal would give Mouchel shareholders a 51.7% stake in the enlarged company if it went ahead and called for a meeting with the board of Mouchel as soon as possible.

Mouchel's shares jumped 15%, or 16.25p, to 124p after the news. Costain's stock slid 3p to 224p.

Mouchel has struggled through the recession, making 2,000 workers redundant since January 2009. It is also in talks with its creditors over its whopping £190m overdraft and has had to call in a hit squad from auditing giant Deloitte to urgently review the business.

It shares hit an all-time low of 56.5p in early December - from a year high of 268p - amid concerns over Government spending cuts and discussions over the refinancing of the debt pile.

Mouchel's clients include Government agencies and councils across the UK, including Milton Keynes, Middlesbrough and Bath & North East Somerset.

Costain, which is focused on the infrastructure, environment and energy sectors, said a combination with Mouchel would create a company with a combined order book of more than £4bn.

Chairman David Allvey said there was compelling strategic rationale for combining the two firms and creating a group with the critical mass to meet demand from customers for larger and longer-term bundled services.

In a trading update released today, Costain said its forward order book on December 31 stood at £2.4bn, compared with £2.6bn the year before. It added that the firm continued to perform well and had finished the year in line with the board's expectations.

Stockbroker Panmure Gordon said of the proposed takeover: 'Strategically, the deal makes sense for Costain, while for Mouchel it gives shareholders the opportunity to continue to benefit in longer term infrastructure attractions.'

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