Contractor Costain today demonstrated its determination to pursue consultant Mouchel, with the announcement that it had upped its offer by 27.6%.
Mouchel rejected the firm’s first offer, which was made on 2 December and comprised 0.5135 Costain shares for each Mouchel share. Based on the closing price per Costain share of 206p on 21 December 2010, the proposal curretnly values each Mouchel ordinary share at approximately 105.8p.
The new proposal comprises 0.5947 new Costain ordinary shares for each Mouchel ordinary share and is worth more than £150M. Based on the closing price per Costain share of 227.0p on 5 January 2011 (being the last business day prior to the date of this announcement), the the new offer values each Mouchel ordinary share at approximately 135.0p, equating to an increase of approximately 27.6%.
In a statement Costain said its Board believed the new offer would be “highly attractive” to both Mouchel’s and Costain’s shareholders and that Mouchel and Costain are “highly complementary businesses”
“We believe that the strategic case put forward in our announcement of 22 December 2010 has been well received by both sets of shareholders and further believe that today’s significantly enhanced proposal provides Mouchel’s shareholders with immediate value as well as future upside potential, allowing them to share fully in future value creation alongside Costain Shareholders, said Costain chairman David Allvey. “Accordingly, we look forward to engaging with the Board of Mouchel as soon as possible.”
The interest comes after Mouchel’s 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 as it holds talks over the refinancing of its 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.
Costain also today issued a trading update that showed that it had a forward order book of £2.4bn as at 31 December 2010. (2009: £2.6 billion), including £800M of work secured for 2011.
It also has a “strong” cash position in excess of £100M with no significant borrowings.