Construction and facilities group Kier (KIE) has topped Costain's (COST) bid for May Gurney (MAYG) with a bid of its own worth some 35 per cent more. May Gurney's agreed all-share merger with Costain is worth the equivalent of 234p a share to May Gurney's shareholders, but the proposal from Kier, now recommended by the May Gurney board, is worth 315p a share, comprising 0.2095 new Kier shares and 50p in cash for each May Gurney share, a 71 per cent premium to the share price on the day before the bid was announced.
By mid-morning on the day of the announcement, Kier had received irrevocable undertakings equivalent to 16.47 per cent of May Gurney's share capital. Following the counter-bid, Costain said it is considering its position and will make a further announcement in due course. But Kier's bid price looks relatively full, according to analysts at Liberum Capital, who also point out that the proposed synergies of £20m are double those mentioned in the Costain proposal. Moreover, Kier's bid includes a 'mix and match' facility that will enable May Gurney's shareholders to vary the proportion they receive in cash, and they will be eligible for a second half-year dividend of 5.6p a share from May Gurney, but not Kier's 21.5p dividend. On a valuation basis, Liberium reckons that the 315p a share offer equates to an enterprise value to cash profits (EV/EBIT) ratio of 11, falling to six by 2016, after adjusting for exceptional items and capital expenditure.
