Mouchel rejects Interserve and Costain

29 March 2011

UK construction consultant Mouchel has rejected separate takeover offers from Interserve and Costain, claiming that the latter would involve "unacceptably high" risk and the former offer "significantly undervalues" its business.

The news effectively ends protracted takeover talks involving both companies - Mouchel said it would not proceed with any further discussions with either suitor, although under UK takeover and merger legislation the business must remain in an "offer period".

Mouchel last month chose Interserve as preferred bidder over Costain, but now claims it would not be in shareholders' interests to continue discussions with either firm.

"The Board believes that Interserve's revised conditional proposal significantly undervalues the business and that Costain's proposal has an unacceptably high level of execution risk to warrant further discussions. Any such discussions would also entail a further period of uncertainty and disruption to the business," Mouchel said.

At the same time as it rejected the takeover proposals, Mouchel also released its first half results, revealing a -73% drop in pre-tax profit to £ 4,1 million (€ 4,6 million).

The company's revenue for the period was £ 270,3 million (€ 307,1 million), compared with £ 312,4 million (€ 355 million) for the first six months of last year. Mouchel said the drop was mainly a consequence of the UK government's deficit reduction measures as many of its outsourcing and consulting services clients include government agencies and councils.

Chief executive Richard Cuthbert described the six-month period as "challenging".

"Our clients have been impacted by the tough economic climate, leading to cuts in capital and maintenance programs and a decline in spending, which has negatively affected our performance," he said, adding, "We remain very confident in our prospects as a stand-alone business."