Contractor issues statement following announcement of £178m Costain merger proposal

Contractor Kier is considering whether to table a rival offer to buy May Gurney following the announcement this morning that the support services firm has agreed a merger with contractor Costain.

Kier has issued a statement saying it “holds May Gurney in high regard” and that a merger with Kier would “create significant value for shareholders, establishing a market-leading and well-balanced business.”

The contractor said it was “considering its options” in the light of Costain’s announcement this morning.  However it added there was “no certainty” that an offer will be made.

May Gurney’s share price, which had already risen by more than 20% on the news of the proposed deal with Costain, jumped by another 10% upon news of Kier’s announcement.

Costain said this morning that it hopes its proposed merger, for which it has secured the agreement of May Gurney’s board, would be able to be completed by early June.

However, a potential  Kier offer raises the prospect of a bidding war which may delay the timetable and increase the price.

Kier’s statement said:

“Kier Group plc (“Kier”) notes the announcement regarding the proposed merger of May Gurney Integrated Services PLC (“May Gurney”) with Costain Group PLC.

“Kier holds May Gurney in high regard and views it as a good quality support services business with a range of services which complements Kier’s existing offering. Kier believes that a combination of Kier and May Gurney would create significant value for shareholders, establishing a market-leading and well-balanced business. The enlarged group would offer an unrivalled range of services to Local Authorities as well as providing Kier with greater access to the regulated sector.

“To that end, Kier has made previous attempts to discuss a potential combination with May Gurney and has been monitoring the business’ recent performance. In light of the announcement, Kier is considering its options.

“A further announcement will be made if and when appropriate. There can be no certainty that an offer will be made.”