COSTAIN said it will bid for bigger and more complex projects after unveiling a £370 million merger with road and rail maintenance firm May Gurney.
About 150 jobs will be cut from a combined workforce of 11,000 as the group looks to save £10 million a year from the all-share deal.
The companies will have combined revenues of £1.6 billion and challenge rivals including Balfour Beatty and Carillion.
Major infrastructure contractor Costain, which is working on London’s Crossrail underground rail tunnel, is based in Maidenhead, which will be the group’s headquarters.
The group plans to retain May Gurney’s headquarters in Trowse, Norwich, as a shared services base. May Gurney has around 800 of its workforce in Norfolk.
Costain’s directors will take the top jobs in the enlarged company, with its chief executive Andrew Wyllie continuing in that role. Costain finance director Tony Bickerstaff and chairman David Allvey will keep their respective positions.
Mr Allvey said: “We see this coming together of two established UK companies as good news for all our stakeholders.
“Our customers are increasingly demanding a broader range of integrated services and this powerful combination will enhance our status as a tier one engineering solutions provider.”
Costain earned pre-tax profits of about £26 million on revenues of £930 million in 2012.
May Gurney had revenues of about £700 million in its latest financial year, earning profits of £19.3 million.
Costain’s existing shareholders will take 53% of the enlarged company, with May Gurney investors taking 47%.
The deal needs the backing of both sets of shareholders.
Analysts at Panmure Gordon said: “The combination of strong local service delivery along with Costain’s national need focus does have attractions. Customers are demanding more integrated service capability whilst looking to reduce the number of suppliers.
“We see transport and energy services as key areas of future investment so May Gurney enhances the Costain offering.”