Costain sweetens Mouchel offer with cash

21st Jan 2011 12:15

Construction and engineering group Costain has improved its offer for outsourced contracting firm Mouchel by offering some cash to shareholders. Costain has talked to Mouchel shareholders as well as its own shareholders and come up with a bid of 0.5531 of a Costain share and 30p in cash for each Mouchel share. At a Costain share price of 222.75p, this values Mouchel at 153.2p a share. That is 171% higher than the Mouchel share price prior to the original offer from Costain. Costain tabled the £172m offer with Mouchel on Wednesday but it is not yet a formal bid. Mouchel says that there are other interested bidders and advises shareholders to take no action. Mouchel says that it expects to secure a new bank facility shortly. This is the second time that Costain has improved its potential offer for Mouchel. Previously it offered 0.5947 of a share for each Mouchel share, valuing Mouchel at 132.5p based on Costain's closing price yesterday. Costain says that its order book is worth £2.4bn. A combined business would have an order book of £4bn. Broker Panmure Gordon says that if the Mouchel management does not enter talks with Costain then the bidder will have to decide whether to put in a hostile bid or walk away. Panmure Gordon reckons that the decision will be made in the near future. The broker believes the two companies are a good fit.