Galliford and Tryin £50mmerger

Galliford yesterday announced a merger with Try Group, in the latest example of consolidation in the construction sector.

Galliford yesterday announced a merger with Try Group, in the latest example of consolidation in the construction sector.

The two companies said they combined to extend their geographical reach and to compete for bigger contracts. David Calverley, chief executive of Try, said the companies were an exceptionally good fit. Try has strengths in housebuilding and is focused on the South-east; Galliford is known as a construction contractor, especially in the Midlands and North.

Analysts said the deal, between two of the sector's smallest listed firms, was aimed at gaining a higher profile among institutional investors. They added that, even with combined value of the new group, £50m, it would struggle to register at the stock market. The all-share deal values Try at 36.75p or £25.4m, a premium of 31 per cent of its closing share price on Monday. Galliford will make up 51.5 per cent.

The enlarged company will have a turnover of almost £500m but pre-tax profits of£12m, because of the low margins in the contracting market. Mr Calverley said: "As our clients increasingly merge, they want to work with fewer and fewer contractors, and they want contractors able to work on a national scale."

He said that scale was also important in order to compete for government contracts under the Private Finance Initiative. Mr Calverley said that the merged company would still be one of the smaller listed groups in the sector, but added: "We will still be pretty small, but we see this as a springboard for further growth."