£119m share offer was rejected by Mouchel earlier this month because it did not “reflect the true value of the Company”

A bid by Costain for Mouchel was rejected earlier this month, which valued the struggling consultant at £119m.

The contractor made an all-share offer approach on 2 December, only for this to be turned down by Mouchel’s board on 6 December.

Mouchel has been struggling with debts of £109m and appointed Deloitte to conduct a review of the business earlier this month after issuing a profit warning in October.

Costain confirmed in a Stock Exchange announcement this morning: “The Board of Costain believes that Mouchel and Costain are highly complementary businesses and that a combination would provide significant benefits for both sets of shareholders.”

In a statement to the City on December 6 Mouchel admitted it had been approached by suitors but had turned down offers because they were too low.

“The Board does not believe that these preliminary approaches reflect the true value of the Company,” it stated. In a follow up statement this morning it confirmed that “it rejected Costain’s proposal on the basis that it significantly undervalues the business.”

The statement by Costain this morning said that there were now “currently no discussions taking place between Costain and Mouchel”.

However in the statement Costain chairman David Allvey argued that a takeover made sense for the two companies.

”The board of Costain believes that there is a compelling strategic rationale for combining Costain and Mouchel.

“In particular, it would provide the enhanced critical mass required by blue-chip customers who are increasingly moving to larger, longer-term bundled or multi-disciplinary solutions.

“The board also believes that bringing together two of the UK’s premium brands with major capabilities across consulting, construction and care, resulting in an order book of over £4bn, would also create significant value for both sets of shareholders,” he said.

It is not known if Costain’s offer was the only approach for a full takeover of Mouchel made after the consultant’s shares dived following an admission it had called in Deloitte to carry out a business review on December 2. Another option for Mouchel is a limited sell-off of struggling parts of the business in advance of securing bank refinancing next year.