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Friday, 21 January 2011 09:37

Third Costain offer values Mouchel at £175 million

 The Costain Board has this morning made a “significantly enhanced” proposal for Mouchel which values the consultancy at £175 million.

The third offer now on the table follows extensive discussions with both Costain’s and Mouchel’s shareholders and values each Mouchel share at approximately 153.2p. The Revised Proposal represents a premium of approximately 171 per cent on the closing Mouchel share price of 56.5p per share on 3 December 2010 (the last business day prior to Mouchel entering into its current offer period) and an increase of £25 million on the offer made earlier this month by Costain.

The Costain Board said it believed that the Revised Proposal was highly attractive to both Mouchel’s and Costain’s shareholders and would:

  • create one of the UK’s premier solutions providers, with major capabilities across consulting, construction and care, and meet the increasing demands of blue chip customers for larger, longer term “bundled” or multi-disciplinary contracts;
  • establish a combined business with enhanced growth prospects through an enlarged private and public sector customer base and a combined forward order book of over £4 billion;
  • provide Mouchel shareholders with a significant equity interest in a well capitalised, enlarged business, with a clear strategy for future profitable growth as well as the opportunity to realise cash for a proportion of their shareholdings;
  • provide the necessary robust capital structure to allow Mouchel, as part of the enlarged Costain group, to meet the increasing trend towards larger, longer term multi-disciplinary contracts;
  • address the likely continuing constraints on the strategic development and growth of Mouchel following a debt refinancing; and
  • provide Mouchel with a highly attractive solution to the strategic and financial issues and uncertainty it faces - issues which were highlighted in Mouchel’s announcement on 6 December 2010, which followed a series of material downgrades to analyst consensus forecasts for the business during 2010 and set out the potential for a dilutive equity fundraising and/or business disposals.

Costain said it had entered 2011 with a strong order book of £2.4 billion and a good pipeline of opportunities - it has also had a number of further contract wins since the start of 2011, including the contract for construction of the new Walton bridge as part of a £32.3 million scheme for Surrey County Council, creating the first new major road crossing over the River Thames in almost 20 years.

Commenting on the revised share and cash proposal, the Chairman of Costain, David Allvey, said:

“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 said its interest in Mouchel had the strong support of Costain’s key lending banks.

Mouchel is currently believed to be in the process of securing refinancing to help it it fend off the unsolicited interest. On Monday Mouchel announced the appointment of Jamie Woods as Operating Group Director for Regulated Industries, who has risen through the ranks of the Group's water business during the past 15 years after joining Mouchel as a graduate in 1996.

Richard Cuthbert, Chief Executive of Mouchel, commented on the appointment: 

"Jamie's extensive experience working with Mouchel's clients in the water and environment industries places him in a strong position to drive the new Regulated Industries operating group and to ensure that we deliver benefits at every level to our clients - from asset management performance to major capital programmes.”

 

 

 

 

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