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Costain takes Mouchel bid on the road to ramp up pressure on board

Costain’s directors are seeking to pressure Mouchel’s board into accepting its latest acquisition offer by touring the country and speaking to the consultancy’s shareholders.

The contractor had an improved offer equivalent to 135p per share turned down by Mouchel’s board last week, but Costain financial director Tony Bickerstaff told CN he was hopeful that discussions with Mouchel shareholders might pave the way for talks to begin with the firm’s board of directors.

 “I was in Scotland yesterday talking to Mouchel shareholders about what we have achieved here at Costain and what we see as an exciting opportunity to develop both companies,” he said. “We will continue to talk about the merits of our proposition with shareholders.”

Mr Bickerstaff said he was surprised by the Mouchel board’s rejection of the offer made on Thursday last week, which valued the consultancy at £150 million, because Costain’s plans had been well received by the Mouchel shareholders he had spoken to.

He added that no new offers were on the table and that Costain’s directors would continue to press the case for the deal as it stands, which would create a business with a combined order book worth more than £4 billion.

However, Mr Bickerstaff warned that the deal would not remain on offer indefinitely. “Fundamentally we are not going to be talking about this forever,” he said.

“Five weeks ago we went public with our bid as we wanted to start a dialogue and we believe time is important. We are determined with our strategy [for growing Costain] and we have options for our strategy. [Mouchel] is a good opportunity but just one of those options and we will get on with it.”

Alternative targets to Mouchel, added Mr Bickerstaff, were likely to be focused on the maintenance and consultancy sectors.

“We have further talks with shareholders planned soon and depending on how that goes, we will reflect on our position. We want to open a dialogue with Mouchel’s management. That is our absolute target.”

Costain’s second takeover proposal was 27.6 per cent higher than its previously rejected approach, made in December, which valued the firm at £119m. The improved offer made last week would give Mouchel shareholders a 51.7 per cent stake in the enlarged company, should a deal go ahead.

However, the Mouchel board rejected the offer last Thursday, issuing a statement saying that the latest bid “significantly undervalues the business”.

Mouchel develops infrastructure for councils and government agencies. Its share price plummeted at the beginning of December, hitting an all-time low of 56.5p in early December from a year high of 268p, due to concerns over its order book and the refinancing of its debt.

In a pre-close trading update issued separately last week, Costain revealed its order book had fallen to £2.4bn as of 31 December 2010 against £2.6bn for the same period the year before.

A Mouchel spokesman declined to comment on Costain’s talks with Mouchel shareholders.


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