Kier Group Plc, the U.K. company that helped build the Channel Tunnel rail link, agreed to buy May Gurney Integrated Services Plc for 221 million pounds ($337 million) in cash and shares.
Shareholders of May Gurney, which maintains roads and railways, will receive 50 pence and 0.2095 of a Kier share for each share they own, Kier said in a statement today. The bid amounts to 315 pence a share, 71 percent more than May Gurney’s closing price on March 25, the day before Costain Group Plc made a lower bid for the company, Kier said. Costain said it’s considering its position.
Kier, based in Bedfordshire, is seeking to expand through government and private-enterprise contracts, the company said in an earnings statement today. The acquisition of May Gurney would enable Kier to win more government contracts as cash-strapped local authorities shift services such as road maintenance to contractors, Kier Chief Executive Officer Paul Sheffield said in a telephone interview.
“There’s a huge opportunity to penetrate more” local authorities, Sheffield said. “It’s a huge market in volume and it’s a market that’s not going to go away.”
Together, Kier and May Gurney have contracts with 65 local authorities, he said. The combination would generate pretax savings of 20 million pounds annually starting in the financial year ending in 2016, Kier said.
May Gurney was up 46.50 pence, or 18 percent, to 299.50 pence at the 4:30 p.m. close of trading in London, the highest since November 2011. Kier was down 5.2 percent at 1,199 pence, the biggest decline since Feb. 23.
Shareholders of Norwich, England-based May Gurney will receive a dividend of 5.6 percent a share instead of a final dividend for the financial year ended March 31.Sheffield will remain chief executive officer at Kier if the deal is approved by both sets of shareholders.
Shareholders accounting for 16.5 percent of May Gurney’s stock have agreed to accept Kier’s offer, the bidder said in a separate statement.