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Costain to merge with May Gurney

Costain picks up beleaguered May Gurney in an all-share deal valuing May Gurney at £400m
March 27, 2013

Costain (COST) has announced plans to merge with May Gurney (MAYG), the troubled infrastructure servicing group that issued a profits warning last September after admitting that some of its waste collection contracts were so badly drawn up that they were losing money. In an all-share deal, May Gurney shareholders will receive 0.8275 new Costain shares for every share held, and Costain shareholders will end up owning 53 per cent of the combined entity.

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The merger will bring Costain a considerably wider geographical spread and, with combined sales of around £1.6bn and a market capitalisation of around £380m, will enable it to tender for larger infrastructure contracts. Specifically, the group will become one of the UK's leading integrated services providers, covering highways, water, rail, waste, airports, nuclear power and local government work. Initial cost savings of around £10m have been identified, although this could easily double.