Costain chief executive Andrew Wyllie has said he wants “early dialogue” with Mouchel’s senior management after his firm went public on its takeover bid yesterday.
Wyllie told NCE that he remained undeterred by Mouchel’s rejection of his firm’s 2 December all-share deal that valued the company at around £120M.
He said that going public with the rejected approach yesterday has allowed the firm to “broaden the debate” and talk directly to Mouchel shareholders. Costain’s main lending banks are already behind the bid.
“We made our approach to Mouchel’s board on 2 December and it was rejected quickly. We kept the door open, but no-one walked through it. Yesterday, as of 7am, we started dialogue with the broader range of stakeholders, including Mouchel shareholders,” said Wyllie.
Wyllie said his chief goal was to achieve “early dialogue” with Mouchel’s senior management to discuss the merits of a takeover. Wyllie said such a takeover would work for both firms strategically and financially, with a combined firm able to boast an order book of around £4bn.
Contractor Costain unveiled an ambitious strategy to expand significantly in consultancy and engineering design in March. The move, to allow the firm to offer clients the “full life cycle” of services, was to be fuelled by acquistional and organic growth.
“No-one has questioned the logic of us moving for Mouchel,” said Wyllie. “We have been looking at them for a number of months. They have a good brand, some good long-term contracts and good people,” he said.
Mouchel and Costain currently compete for Highways Agency maintenance work, an area that Costain has expanded rapidly into. By buying Mouchel, Costain would eliminate a major competitior, but Wyllie stressed that this was not the reason for his firm’s approach.
“They are not someone we necessarily work with, and we compete against them for MAC [Managing Agent Contractor] contracts. But we do come across them often as designers or client’s representatives, which is why we know they have some very good people,” said Wyllie. “They are a very neat fit.”
Costain’s offer, made on 2 December, 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 proposal was rejected by the Mouchel board on 6 December, and the consultant reiterated its rejection of the offer yesterday.
In a statement to the London Stock Exchange it said that, following consultation with its advisers, it had rejected Costain’s proposal on the basis that it significantly undervalues the business.
Mouchel shares were trading as low as 53.25p shortly before the offer, down on a year high of 285.25p. As recently as October shares were trading at 150p or more.