Costain drops out of battle for May Gurney

Costain has said it will not make a revised offer for May Gurney follow Kier’s proposed £221m takeover of the firm.

In a statement to the City this afternoon, the firm said it would not make a revised offer for May Gurney, following the announcement yesterday that the boards of Kier and May Gurney had agreed a £221m takeover deal.

This trumped Costain’s proposed £178m merger with the service firm, which was announced last month.

Costain said it “having undertaken several months of detailed due diligence, it does not believe that it would be in the best interests of Costain shareholders for Costain to amend the terms of its proposed merger with May Gurney”.

“Accordingly, Costain will not be making a revised offer for May Gurney and intends to lapse the proposed erger at the earliest opportunity.”

It said this was expected to occur on 29 May 2013.

Following the announcement of Kier’s takeover plan yesterday, which outbid Costain by 35%, analysts said Costain was unlikely to be able to rival Kier’s 315p offer, which includes £35m in cash.

Costain’s withdrawal will come as a blow for the firm’s chief executive Andrew Wyllie, after the firm also failed in a bid for Mouchel in 2011. Then Costain tabled four bids of increasing value after repeated knock-backs, only to see its prospective partner solicit a deal with rival Interserve.