Buzz of bidding war pushes up Mouchel shares

SHARES in Mouchel, the infrastructure services group, surged yesterday after it warned that other suitors could enter the bidding fray kicked off by unsolicited approaches from Costain, which has again increased its offer for the smaller group.

The troubled Mouchel, which is in refinancing discussions with its bankers, said it had received other approaches since Costain put forward its original proposal in early December. "We are actively reviewing these and other options," Mouchel said "Our priority remains to enhance shareholder value, and the board strongly advises shareholders to take no action."

The statement followed the tabling of an improved offer from Costain, the engineering and construction group that is looking to expand in the area of facilities management. Costain said it is now prepared to pay 172 million for Mouchel, a 13.5 per cent premium to its last offer announced on 6 January.

The offer, previously an all-paper deal, now includes a cash sweetener of 30p plus 0.5531 Costain shares for every Mouchel share held. Based on Costain's closing price of 222.75p on Thursday, that values each Mouchel share at about 153p.

Mouchel, which provides management infrastructure plus consultancy and design services, has been hit hard by the financial downturn and public sector cuts. The group does a wide range of work for local authorities, from management consulting to road maintenance. It has debts of about 83m.