Mouchel rejects Costain

By Helen Wright11 January 2011

London-based support services group Mouchel has rejected a second, sweetened takeover proposal from UK engineering and construction company Costain that valued the company at £ 152 million (€ 183 million).

Costain said it was "surprised" by Mouchel's response to its revised approach.

"This decision by the Board of Mouchel denies its shareholders the opportunity to have a major stake in a well capitalised, financially efficient, enlarged business, with a clear strategy for future profitable growth," Costain said.

A tie-up between Costain and Mouchel would create an entity with a combined forward order book of over £ 4 billion (€ 4,8 billion), according to Costain.

The enhanced proposal valued each Mouchel share at 135p and represented an increase of approximately +27,6% over the value of Costain's original proposal, which Mouchel rejected on 22 December last year.

The new proposal would also see Mouchel shareholders receive an increased equity interest in the potential new combine of approximately 51,7%.

But Mouchel's board said the revised 135p all-share offer, up from 105.8p in December, still "significantly undervalues" its business.

This is not the first time that Mouchel has been approached about a potential takeover in the last 12 months.

In February 2010, the company received a bid of 294p per share from VT Group that valued Mouchel at around £ 330 million (€ 397 million). This was rejected and later withdrawn when VT was taken over by Babcock.

The news of the latest Mouchel rejection came after Costain issued a bullish trading update on 6 January.

The group's order book at 31 December 2010 stood at £ 2,4 billion (€ 2,9 billion), and Costain said it was currently the preferred bidder on contracts with an aggregate value of more than £ 400 million (€ 480 million).

David Allvey, chairman of Costain, said, "The board of Costain continues to believe that there is a compelling strategic rationale for combining Costain and Mouchel, and creating an enlarged group with enhanced critical mass to meet the customer trend towards larger and longer-term bundled solutions."

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