Kier, Costain may do battle for May Gurney
Kier says it is 'considering its options' over potential counter-bid
Construction group May Gurney has become the subject of a potential takeover battle between rivals Costain and Kier Group.
Yesterday morning, Costain Group announced that it had agreed an all-share merger deal with May Gurney's board in a deal which values the latter at around $270m (£178m). Both companies are listed on the London Stock Exchange.
Under the terms of the deal, May Gurney shareholders would receive 0.8275 shares for each Costain share, giving them a 47% share of the larger business.
However, later in the day Kier Group announced that it was "considering its options" over whether to launch a counter bid.
"Kier holds May Gurney in high regard and views it as a good quality support services business with a range of services which complements Kier's existing offering," the company said. "Kier believes that a combination of Kier and May Gurney would create significant value for shareholders, establishing a market-leading and well-balanced business.
"The enlarged group would offer an unrivalled range of services to local authorities as well as providing Kier with greater access to the regulated sector."
When making its announcement, Costain said that both its own and May Gurney's board were recommending a merger deal to create a combined entity known as Costain May Gurney.
It added that the deal would create an entity with "greater financial strength and scale", which will allow it to bid for larger and more complex contracts.
If the deal went ahead, Costain May Gurney firms would have a combined order book of around $5.9bn (£3.9bn) and annual revenues of $2.4bn (£1.6bn).
Costain added that it had already received undertakings from 32.5% of shareholders agreeing to the deal.
Costain's non-executive chairman, David Allvey, said: "The Costain strategy has been extremely clear: to become a leader in the design, delivery and maintenance of national infrastructure.
"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."
Both Kier Group and Costain have a presence in the Middle East. Costain, which was involved in building Dubai International Airport, appointed its former highways director Tim Bowen to oversee growth plans in the region in June last year. Kier Group has a presence in Saudi Arabia and recently disbanded a joint venture with Abdullah AM Khodari which was looking at joint ventures in the Kingdom's Eastern Province.