Mouchel rejects Interserve and Costain bids as 450 jobs go

Aaron Morby 12 years ago

Mouchel has rejected the bid offers from both Interserve and Costain claiming they undervalued or presented too much risk to the company.

The move to dismiss all current offers on the table comes with backing from major shareholders in the consultancy business.

Mouchel’s share price slumped nearly 30% this morning.

But the bidding saga may yet drag on after the board said it had kept the door open to revised offers although Interserve has ruled out an improved bid.

Richard Cuthbert, Chief Executive of Mouchel, said: “We are no longer in talks with Interserve and have decided it is not in shareholders’ interests to proceed with Costain.

“Although we can see some benefit, in the current environment, from being part of a larger group, the significant integration risks and the prospective valuation meant that we were unable to recommend the transaction to shareholders.

“We remain very confident in our prospects as a stand-alone business.”

Mouchel said the decision to reject both bids had been taken without consulting Costain or Interserve and the board would consider revised offers.

The decision was announced as Mouchel unveiled a £1.5m pre-tax loss in the half-year to end of January on turnover down 13% at £270m.

Net bank borrowings were down from £115.7m to £96.9m.

The firm also revealed it had made good progress with its debt reduction plan.

Mouchel has agreed heads of terms with an investment partner for its Middle East business and has begun preparatory work for the disposal of certain non-core businesses in the UK.

Mouchel has cut staff more heavily than first expected realising cost savings of £32m rather than the £25m first targeted.

Employee levels have dropped from 10,200 in July 2010 to 9,700 at the start of this year with another 450 redundancies planned before the end of next month.

So far it has closed 14 offices, reducing office space by 7%. It plans to reduce occupied space by another 13% over the next twelve months leading to further annualised savings of over £2m.

Cuthbert added: “We will continue to play a leading role in transforming essential services and sustaining vital infrastructure across the UK public sector and in selected overseas territories.

“In an environment where all of our clients are facing the challenge of delivering higher quality services more efficiently, it is clear that our skills will be increasingly in demand and this underpins our long term, positive outlook.”

Mouchel said its order book stood at £1.6bn, with a bidding pipeline of £2bn.

The battle for control of Mouchel has been running since late last year when Costain made its first bid approach for the ailing consultancy.

In total, Costain tabled four offers, steadily upping its bid to £175m.

In February, Interserve confirmed it was in advanced takeover talks with Mouchel and would put together a cash and shares deal once given access to due diligence materials.

That offer has been rejected as under valuing Mouchel.

Interserve confirmed this morning that it would not be going back with an improved offer.
Chief Executive Adrian Ringrose, said: “Following several weeks of due diligence we put a revised proposal to the Mouchel Board that we believe was in the interests of both Interserve and Mouchel shareholders.

“Following Mouchel’s decision not to proceed with that proposal we will be focussing on implementing our plans to deliver value for Interserve shareholders through the medium term growth of our business, as outlined in our recent annual results presentation.”

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