May Gurney has agreed a takeover offer from construction firm Kier, trumping one made last month by rival builder Costain.
Kier has bid £221m for the Norwich-based environmental services company, well ahead of the £178m bid by Costain and previously agreed by May Gurney.
Under the terms announced, May Gurney shareholders will receive 0.2095 new Kier shares and 50p in cash for each share they hold, a premium of 71% against May Gurney’s share price.
Kier chairman Phil White said: “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.”
May Gurney chair Baroness Ford said Kier’s offer was “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.”
Kier said that based on 2011/12 figures the combination of the two companies would have revenues of £2.8bn, drawn 41% from services, half from construction and 9% from property.
Speaking to MRW’s sister title Construction News after announcing his bid, Kier chief executive Paul Sheffield said turnover targets were in place for the new, enlarged, company but were not going to be made public and that they would “wait and see” whether Costain came back with an improved offer.
He said: “It is massive, the biggest boost will be to our services side. May Gurney do about £650m [in services] so combined we will do more than £1bn a year with a strong, strategic order book.
“The deal will open up the geography of the UK to us and between us we will be working with 65 local authorities out of 350 so there will be plenty of scope to expand between the two of us.”
He added that local authorities were “unlikely” to start bundling up all their requirements and offering them to one contractor, but that there were contracts coming to the market where “we are seeing two or three services that have been bundled into one contract”.
Sheffield said the May Gurney brand name would be retained where appropriate.
May Gurney had a turbulent 2012, in which it reported a 17% pretax profit increase to £28.4m in the 12 months to 31 March 2012, but in September issued a profit warning, stating that it would “significantly under-perform its original expectations” for the year, and that chief executive Philip Fellowes-Prynne would leave “with immediate effect”.
It blamed the problems on loss-making kerbside sort collection contracts in Bristol and Chester.
May Gurney’s local authority waste contracts are with: Barnet, Bath and North East Somerset, Bridgend, Bristol, Cheshire West and Chester, Essex, Gloucestershire, Hackney, North Yorkshire, Norfolk, North Somerset, Somerset, Torbay, Waltham Forest, West Oxfordshire and Walsall.