Costain Group PLC confirmed this morning that it is pursuing its hostile takeover bid for Mouchel. Costain Group PLC confirmed this morning that it is pursuing its hostile takeover bid for Mouchel.

Costain made its first approach on 2 December 2010, with an offer of approximately 105.8p for each Mouchel ordinary share–valuing the company at around £118 million. The Proposal was rejected by the Mouchel Board on 6 December and there are currently no discussions taking place between Costain and Mouchel.

Mouchel’s share price, which had slumped to 56.5p at the beginning of December against a year high of 268p, rose by about 20% with today’s announcement by Costain. Under the Proposal, which has the strong support of Costain’s key lending banks, Mouchel’s shareholders would receive approximately 48.0 per cent of the enlarged share capital of Costain.

According to Costain, the combination of Mouchel and Costain would provide significant benefits for both sets of shareholders, by

• creating one of the UK’s premier solutions providers, with major capabilities across consulting, construction and care, delivered through two respected brands;

• meeting the increasing demands of blue chip customers who are consolidating their requirements into larger, longer term “bundled” or multi-disciplinary contracts and thereby significantly increase the addressable market for both businesses;

• benefiting from enhanced growth prospects through an enlarged private and public sector customer base and a combined forward order book of over £4 billion;

• generating significant, realisable synergies; and

• creating significant value for both sets of shareholders through earnings enhancement, dividend income and the potential for a re-rating of the combined business.

Costain said the Proposal would provide Mouchel’s shareholders with a major stake in a well –capitalised business, with a clear strategy for future profitable growth.

Commenting on the Proposal, the Chairman of Costain, David Allvey, said:

“The Board of Costain believes that there is a compelling strategic rationale for combining Costain and Mouchel. In particular, it would provide the enhanced critical mass required by blue-chip customers who are increasingly moving to larger, longer-term bundled or multi-disciplinary solutions.

“The Board also believes that bringing together two of the UK’s premium brands with major capabilities across consulting, construction and care, resulting in an order book of over £4 billion, would also create significant value for both sets of shareholders.”

Costain said its strategy was both to build on the Company’s current strengths and to broaden and improve the quality of earnings streams by accelerating the development of an integrated business, providing front-end engineering consultancy, construction and ongoing care and maintenance services. Costain currently has a forward order book of £2.4 billion, while Mouchel's order book stands at £1.8 billion with an increase in its pipeline of tenders and near term opportunities to £2.6 billion.