Contractor Balfour Beatty has made a £32m recommended offer for civil engineering firm Birse Group as part of a strategy of regional expansion

The bid for Birse, which had a turnover of £340m for the year to 30 April 2005, was announced on Monday. The offer values Birse at 16.625p a share, and has been backed by the company's directors.

Ian Tyler, Balfour chief executive, said the acquisition of Birse, which is based in Northampton and Cheshire, was a "substantial step in delivering Balfour's strategy of expanding its regional presence".

Birse operates in civil engineering and construction, and has been rumoured to be a takeover target since posting a big loss for the second half of last year.

The group recorded a £9.9m deficit for the six months to 31 October 2005 despite halving the size of its construction division, Birse Build, following previous financial difficulty. The loss included a £5.7m legal bill for a dispute with Citibank over a fit-out project in Lewisham, south-east London.

The acquisition will strengthen Balfour's presence in coastal and rail civil engineering work. Birse Build, which focuses on education work in northern England, will be integrated into Mansell, Balfour's regional building business.

Peter Watson, Birse's chairman, said:

"With opportunities increasing in infrastructure markets, the stronger covenant offered by Balfour will enable our businesses to take a leading position in meeting that demand."

Balfour confirmed that it was planning further regional acquisitions. A spokesperson said: "There are still some areas of the map that are without the Balfour Beatty blue. Acquisition is a continuing strategy if and when opportunities arise."

The deal will be some consolation to Balfour for its failure to acquire Mowlem in February. Balfour pursued the contractor before it was eventually bought by Carillion.