Costain says Mouchel rejected takeover proposal

22nd Dec 2010 07:17

Construction and engineering group Costain has emerged as one of the companies that has made an approach to struggling support services group Mouchel.Costain announced today that it approached Mouchel's board on 2 December, with a view to making an offer comprising 0.5135 Costain shares for every Mouchel one, valuing Mouchel at 105.8p based on Costain's closing price yesterday. The offer represents a premium of 87.2% to Mouchel's closing price on December 3 and 44.9% to its closing price yesterday, Costain said.Mouchel said on 6 December that it is mulling a share issue and wholesale disposals to fend off takeover approaches sparked by the recent collapse in its share price.It issued a statement today, claiming the offer "significantly undervalues the business".Costain said the proposal, which has the support of its key lending banks, makes sense because they are 'highly complementary' businesses.The two companies both have a strong engineering focus and receive many of their contracts from the public sector. Costain said a tie up would "create one of the UK's premier solutions providers, with major capabilities across consulting, construction and care, delivered through two respected brands."Costain chairman David Allvey said there is a 'compelling strategic rationale' for the combination."It would provide the enhanced critical mass required by blue-chip customers who are increasingly moving to larger, longer-term bundled or multi-disciplinary solutions," he said."The board also believes that bringing together two of the UK's premium brands with major capabilities across consulting, construction and care, resulting in an order book of over £4 billion, would also create significant value for both sets of shareholders."Mouchel has issued a series of profit warnings since October amid growing concern over its financial position and a bank loan refinancing.