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Mouchel rejects reduced takeover bids from Costain and Interserve

Mouchel revealed it has rejected takeover proposals by both Interserve and Costain as it posted a £1.5 million pre-tax loss in the half-year to the end of January.

Interserve last month said it had begun a due diligence process on Mouchel’s books after making a £175m approach for the engineering consultancy.

Costain also made a £175m offer but in a statement to the city this morning, Mouchel revealed both firms had cut their bids after going through Mouchel’s books.

Mouchel also revealed half-year results till 31 January today which saw year-on-year turnover down 13 per cent at £270m. Shares in the company fell by almost 30 per cent after the announcements.

In a statement, Mouchel revealed that its board believed Interserve’s revised conditional proposal “significantly undervalues the business” and that Costain’s proposal has an “unacceptably high level of execution risk to warrant further discussions”. 

It added: “Any such discussions would also entail a further period of uncertainty and disruption to the business.”

Mouchel chief executive Richard Cuthbert said: “It has been another challenging period for Mouchel. Our clients have been impacted by the tough economic climate, leading to cuts in capital and maintenance programs and a decline in spending, which has negatively affected our performance.

“Furthermore, recent corporate activity has been an unwelcome disruption to our business. We are nevertheless trading broadly in line with our expectations.”

Interserve chief executive, Adrian Ringrose said: “Following several weeks of due diligence we put a revised proposal to the Mouchel Board that we believe was in the interests of both Interserve and Mouchel shareholders.

“Following Mouchel’s decision not to proceed with that proposal we will be focussing on implementing our plans to deliver value for Interserve shareholders through the medium term growth of our business.”

After posting its six-month results to 31 January, Mouchel issued a statement which said: “We anticipate that the current trading environment will remain challenging in the short term. As a result, our focus remains firmly on supporting existing clients in helping them to achieve their objectives while managing our own cost base and cash resources tightly.”

The firm also insisted it must continue to win work in “those parts of the business where there has traditionally been less visibility” and added that the task was made more difficult by the government’s deficit reduction programme resulting in delayed or reduced spending decisions from its public sector customers.

Mouchel’s order book stood at £1.6 billion at the end of January 2011, compared with £2bn at the same point last year.

Mouchel also revealed that as part of its focus on maximising operational efficiency, staff numbers had been reduced in parts of the business including by 22 per cent in management consulting to 358 staff, 4 per cent to 4,023 in government and business services and 14 per cent to 3,488 in its highways division, compared with January 2010.

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