Costain said it had gone public on its offer to try and open talks with shareholders in outsourcing group Mouchel, whose operations include a road maintenance joint venture in Scotland, and which has been hit hard by government cutbacks.
Mouchel recently embarked on a strategic review after saying it may need fresh funds if it fails to reach a refinancing deal with its banks.
Costain said there was a "compelling strategic rationale" behind a combined group which would have an order book of more than 4 billion.
The company will talk to Mouchel shareholders directly after the board rejected the all-share approach made on 2 December and declined the opportunity for talks.
In a brief statement yesterday, Mouchel said the offer significantly undervalued the business.
Costain's chief executive Andrew Wyllie said: "We approached them earlier in the month with a desire to speak to their management team. That opportunity was rejected and there haven't been any discussions since. As a result of going public, we would hope to talk to their shareholders and we'll see how it develops from there," he added.
Costain said its offer, which had the strong support of its key lending banks, comprised 0.5135 new Costain shares for each Mouchel share, valuing Mouchel shares at 104.75p at current share prices.
Shares in Mouchel, which had lost three-quarters of their value since February, rose 32.2 per cent, or 23.5p, to 96.5p yesterday. Shares in Costain, which has consultancy and maintenance interests as well as construction and engineering divisions, closed down 1p at 205p.
Brewin Dolphin analyst Mark Fleetwood said Mouchel's depressed share price made it attractive for a number of bidders, particularly given longer term opportunities in local authority outsourcing.