The cash and shares bid comes after Mouchel bosses rejected the last two takeover approaches of £152m and £119m, claiming they significantly undervalued the company.

But Mouchel said today it was “actively reviewing” offers for the company as it emerged that rival bids to Costain’s are also being considered

Costain’s latest bid represents a premium of 171% on the value of Mouchel before its bid approach was first revealed.

Costain said the latest offer had been drawn up after extensive talks with both sets of shareholders.

Mouchel has been struggling under the weight of its £109m debts leading to Deloitte being appointed at the end of last year to carry out a review of the business.

The contractor has been stalking Mouchel for months. It argues that bringing the two brands together would build a construction business with major capabilities across consulting and construction resulting in an order book of over £4bn.

Chairman of Costain, David Allvey, said: “The strategic rationale for a combination has been widely supported and following extensive discussions with both sets of shareholders we have now significantly enhanced our proposal.

“We firmly believe that a combination of the two businesses is clearly in the best interests of both sets of shareholders and would bring resolution to the issues Mouchel faces for the benefit of its shareholders, customers and employees after a sustained period of uncertainty.

He added: “Moreover, as part of a strong Costain group with a well-capitalised balance sheet, Mouchel would be better placed to compete effectively for major contracts.

“Having made our first approach to Mouchel seven weeks ago and as one of a number of options to deliver our strategy, we believe that our revised proposal is attractive to both sets of shareholders and should now encourage Mouchel’s board.” to engage with us without delay.”

Shares in Mouchel, which have risen by more than 50% in the last month, closed at 113.75p on Thursday, valuing the business at around £133m.

The latest takeover bid saw the price surge by another 22% in early trading today.