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Costain to buy May Gurney for £178m

Costain is set to buy May Gurney in a move that will create a £1.6 billion infrastructure and services company.

According to Construction News, the tie-up will see Costain acquire the entire share capital of May Gurney. The combined firm will have a market capitalisation of £378m and be named Costain May Gurney plc.

Costain directors expect the all-share merger, of which terms have been agreed, to be “double-digit earnings enhancing” for the company in 2014. The proposal is being put to shareholders on May 8.

The new business will be led by Costain chief executive Andrew Wyllie as group CEO, with his financial director Tony Bickerstaff as group FD.

The merger prices May Gurney’s shares at 253.22 pence, valuing the entire firm at £178m.

The combined headquarters will be at Costain’s base in Maidenhead, Berkshire.

Each May Gurney shareholder will receive 0.8725 new Costain shares for every scheme share held. It means Costain shareholders will own 53 per cent of the new business, while May Gurney’s will own 47 per cent.

They estimate pre tax synergies, or cost savings, of £10m.

The companies said it will put the companies in a position to bid for larger, more complex and multi-displinary contracts. It also signals a combined order book of £3.9bn.

Costain shares were down 3 per cent at 292.75 pence today, while May Gurney shares were up 27 per cent to 235 pence.

Costain’s David Allvey will be group chairman, with May Gurney’s Baroness Margaret Ford as deputy chairman.

Mr Allvey said: “The Costain strategy has been extremely clear: to become a leader in the design, delivery and maintenance of national infrastructure. The announcement today is a highly significant step in that process.

“Together with May Gurney we will have the added experience and skills to underline our leadership status and to provide a platform for new growth and success.

“We see this coming together of two established UK companies as good news for 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.”

Baroness Ford said the two firms are “highly complementary businesses”.

“The markets in which we operate offer tremendous opportunities for future growth.

“Our objective is to deliver even stronger partnerships with clients, superior returns for our shareholders and increased opportunities for our staff.”

May Gurney saw its chief executive leave last September after a profit warning.

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