Mouchel stands firm as Costain raises offer again

Construction firm Costain raised the stakes in the battle for outsourcer Mouchel yesterday with a new takeover proposal worth around £175m.

It is the second time that Costain has increased its offer price, but the company's hopes of securing a deal continue to be frustrated after Mouchel revealed it was also considering other takeover approaches.

Mouchel has so far refused to engage in talks with Costain after rejecting two previous offer proposals.

It said it was "actively reviewing" further recent approaches made since early December, while it also thrashes out a new financing deal for its debt pile – seen as key to its bid defence.

Shares in Mouchel raced ahead by another 23 per cent yesterday as investors relished the prospect of a potential takeover tussle.

Costain's new all-share proposal marks a 45 per cent hike on its first indicative offer, which valued Mouchel at around 118m.

David Allvey, chairman of Maidenhead-based Costain, said he hoped it would "encourage Mouchel's board to engage with us without delay".

Costain's pursuit comes after Mouchel shares hit an all-time low of 56.5p in early December, down from a year high of 268p, amid concerns over Government spending cuts and as it holds talks over debt refinancing.

But Mouchel urged shareholders to take no action as it closes in on a deal with banks. Mouchel said it had made "significant progress" in talks with lenders Barclays, Lloyds Banking Group and Royal Bank of Scotland and hoped to finalise new arrangements shortly.

The group has clients including Government agencies and councils across the UK, including Milton Keynes, Middlesbrough and Bath & North East Somerset.

Costain believes its proposed bid would create a stronger combined group with the scale and might to meet demand from customers for larger and longer-term bundled services.

A deal between the two would also "address the likely continuing constraints on the strategic development and growth of Mouchel following a debt refinancing", said Costain.

Costain is focused on the infrastructure, environment and energy sectors. It said in a trading update yesterday it ended 2010 on track with forecasts.