Costain targets Mouchel at £170m

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Costain raised the stakes in the battle for the outsourcer Mouchel with a new takeover proposal worth £170m yesterday.

It is the second time that Costain has increased its offer price, but the company's hopes of securing a deal continue to be frustrated after Mouchel revealed it was also considering other takeover approaches.

Mouchel has so far refused to engage in talks with Costain after rejecting two previous offer proposals. It said it was "actively reviewing" further recent approaches made since early December, while it also thrashes out a new financing deal for its debt pile – seen as key to its bid defence. Shares in Mouchel raced ahead by 20 per cent as investors relished the prospect of a potential takeover tussle.

Costain's new cash-and-paper proposal marks a 44 per cent increase on its first indicative offer, which valued Mouchel at £118m. But Mouchel urged shareholders to take no action as it closes in on a deal with banks. Mouchel said it had made "significant progress" in talks with lenders and hoped to finalise new arrangements shortly.