Contractor Kier’s proposed merger with rival May Gurney has been in consideration for two years, NCE learnt this week.
Kier chief executive Paul Sheffield told NCE that the firm has considered May Gurney as a “good fit” and a way to expand its services division, which does maintenance, facilities management and waste management work.
“We have been interested in Kier for a couple of years,” he said. “We always knew it was a good quality business and a good fit.”
Kier launched its £221M bid after Costain had offered to merge with May Gurney in March with an all share deal valued at £178M.
Costain last week said it would not increase its bid in response to Kier’s offer.
May Gurney’s market value on 25 March, the day before the Costain deal was announced, would have been £130.2M.
Sheffield said that he believed the proposed takeover of May Gurney would benefit both firms, even though May Gurney had issued a profit warning in September 2012.
“The profit warning was confined to one area [refuse collection],” said Sheffield. “The rest of the business was sound.”
Sheffield said geographically Kier and May Gurney are a “good fit” with very little overlap. Combined the firm’s geographical reach would in the main cover England, along with some local authority work in South Wales and Scotland.
Kier said the takeover would mean that it would be able to target more local authority work.
“There are 350 local authorities in the UK,” said Sheffield. “Between us [Kier and May Gurney] we operate in 65 so that’s another 285 to go at.”
“There’s not much we don’t do between us,” he added.
Kier’s Services division turnover is expected to rise from about £455M in 2012 to over £1bn after the takeover.
The firm estimates that up to £20M will saved through efficiencies after the merger.
Kier’s head office will remain at Tempsford Hall in Bedfordshire while May Gurney’s current headquarters in Trowse in Norfolk will be retained as a shared services centre for the new firm.
Sheffield said the merger would have little effect on Kier’s Construction division. But he said that overall Kier would benefit from the increased diversification.
He said Kier’s three major divisions – construction, property and services – work within different economic cycles, so the firm should be better protected if there is a downturn any of these sectors.
May Gurney shareholders have until 22 May to formally respond to Kier’s bid.
Kier pushes for Hinkley Point C decision
Kier chief executive Paul Sheffield urged the government to make a final decision on whether to help fund construction of Hinkley Point C new nuclear power station.
Sheffield said industry was “waiting” for the government to either agree a fixed price for electricity with EdF to enable construction on Hinkley Point C or “rip up” the plans.
“There needs to be some courage and decision making,” said Sheffield.
He said the government needs to decide whether it will back nuclear or abandon the technology and allow gas fired power stations to be constructed instead.
“I’m not sure the government realises the game of Russian roulette it’s playing,” he said.
EdF signed a £100M earthworks contract with Kier and Bam Nuttall last year but his team has been mostly stood down. The future of the project has been thrown into doubt because of delays to the agreement about the price of electricty from the plant. Sheffield said it was very “frustrating” for him to manage because of the uncertainty.