Kier, the construction and support services group and May Gurney, the waste and infrastructure firm, have this morning announced they have agreed terms of a recommended acquisition offer. May Gurney had previously agreed – and recommended to its shareholders – an all-share merger with Costain, the construction group, however this new offer promises significant improvements in renumeration benefits for May Gurney shareholders.
Following the announcement at the end of March of an agreed Costain/ May Gurney merger, Kier announced it may put in a rival acquisition bid, noting May Gurney’s range of support services would complement Kier’s own existing offering and its previous attempts to ‘discuss a potential combination’.
Today, the boards of Kier Group and May Gurney announced the terms of the recommended deal. Under the terms of the acquisition, May Gurney shareholders will receive 0.2095 new Kier shares and 50 pence in cash for each May Gurney share. The consideration for the acquisition represents a value of 315 pence per May Gurney share, or £221 million in aggregate, representing a premium of approximately 71 per cent to the closing price of 184 pence per May Gurney share on 25 March 2013 (just before the Costain Group merger announcement) and a premium of approximately 35 per cent to the current value of the Costain proposal of 234 pence per May Gurney share.
Following completion of the acquisition, May Gurney shareholders will own approximately 27 per cent of the enlarged group.
The Kier directors believe that the acquisition will significantly enhance Kier’s existing services division, bringing together two businesses with highly complementary skill sets, service offerings, geographic exposure and customer bases. The enlarged services division would be a leading provider of services to the local authority and regulated utility sectors.
The enlarged group, which would have significant earnings visibility, underpinned by long-term contracts and a combined order book of approximately £5.7 billion, will have a proven management team led by the current Kier CEO, Paul Sheffield, as group CEO and the current Kier finance director, Haydn Mursell, as the group finance director. Phil White will be the chairman.
Phil White, chairman of Kier, commented:
“Scale, performance and reputation are three essential elements of a successful services business. The combination of Kier and May Gurney has all three and is a natural fit. “
Baroness Margaret Ford, chairman of May Gurney, commented:
“This is a compelling transaction for May Gurney Shareholders. It offers a highly attractive combination of a significant premium, a cash element and, through the scale and strategic fit of the Enlarged Group, allows May Gurney Shareholders to share in the growth of one of the UK’s leading integrated services and construction companies.”
The acquisition is conditional on, amongst other things, the approval of Kier Shareholders and May Gurney Shareholders and following legal and financial advice, boards intend to recommend unanimously that their respective shareholders vote in favour of the scheme.
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