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Mouchel 'actively reviewing' Costain takeover bid

The Mouchel board is “actively reviewing” Costain’s latest offer to buy the company.

In a statement to the City, Mouchel softened its previous position - which firmly rejected Costain’s previous proposal - in the light of this morning’s improved offer from Costain valuing the firm at £175 million.

The announcement is in stark contrast to Mouchel’s response to Costain’s previous approach on 6 January, when it said “it has rejected Costain’s indicative conditional proposal on the basis that it significantly undervalues the business”.

In its latest statement, Mouchel also said it was close to completing the refinancing of its banking facilities.

This morning, Costain tabled what it called a “significantly enhanced” new proposal to the board of Mouchel for an offer valuing its shares at 153.2 pence.

The revised proposal values the consultancy at £175 million, £25m up on the offer made earlier this month. It also includes a cash element, for the first time, which would return 30p a share to Mouchel shareholders as well as Costain shares.

This third approach, made on 19 January, a statement says, “represents a premium of approximately 171 per cent to the closing Mouchel share price of 56.5 pence per share on 3 December 2010 (the last business day prior to Mouchel entering into its current offer period).”

Brewin Dolphin analyst, Michael Parkinson, said Mouchel’s latest statement suggested its board were likely to sit around the table with Costain.

He said: “Up to now Mouchel believed the offers had greatly undervalued the company. There is no mention of that now. They also mentioned that they were close to refinancing. So I think they are going to try to get the offer up. But now we have the basis for a discussion.”

Costain chairman David Allvey said in this morning’s statement: “The strategic rationale for a combination has been widely supported and following extensive discussions with both sets of shareholders we have now significantly enhanced our proposal.

“We firmly believe that a combination of the two businesses is clearly in the best interests of both sets of shareholders and would bring resolution to the issues Mouchel faces for the benefit of its shareholders, customers and employees after a sustained period of uncertainty. Moreover, as part of a strong Costain group with a well-capitalised balance sheet, Mouchel would be better placed to compete effectively for major contracts.

“Having made our first approach to Mouchel seven weeks ago and as one of a number of options to deliver our strategy, we believe that our revised proposal is attractive to both sets of shareholders and should now encourage Mouchel’s Board to engage with us without delay.”

Costain - led by chief executive Andrew Wyllie - had an improved offer equivalent to 135 pence per share, which valued the consultancy at £150m, turned down by Mouchel at the beginning of the month, but said it hoped to convince shareholders to push for talks with Mouchel directors.

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.

Mouchel’s board put out a statement after the improved bid was made this morning. It said: “On 6 December 2010, we announced that the refinancing of our banking facilities was proceeding to plan and that we expected to agree new medium term facilities by the time of our half year results announcement in March 2011.

“We have made significant progress since then and we expect to finalise the new facilities shortly.  The group’s key relationship banks, Barclays, Lloyds Banking Group and RBS, remain supportive.

“We also announced, on 6 December 2010, that we had received approaches which would, if made, result in an offer being made for the company for the purposes of the City code on takeovers and mergers.  Since then, we have received further approaches.  We are actively reviewing these and other options.

“Our priority remains to enhance shareholder value, and the board strongly advises shareholders to take no action.

“A further announcement will be made as appropriate.”

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