Finally - Kier announces takeover of Mouchel

I'm glad to see that Kier Group has finally announced the £265 million takeover of Mouchel. Readers might recall that I broke the story late last year on Tip TV and Betaville - here is a link http://betaville123.blogspot.co.uk/2014/11/banks-edge-closer-to-400-million.html - that Kier Group was in talks to buy Mouchel for a decent chunk of change.

Kier is funding the deal with a £340 million equity capital fundraising.

Here is the main part of this morning's deal announcement:

PROPOSED ACQUISITION OF MOUCHEL AND FULLY UNDERWRITTEN £340 MILLION RIGHTS ISSUE

Kier, the FTSE 250 property, residential, construction and services group, announces that it has entered into a conditional agreement to buy the entire issued share capital of MRBL Limited ("Mouchel"), the leading provider of repair and maintenance services to the UK strategic road network and an international infrastructure and business services group.

Highlights

Mouchel is an international infrastructure services and business services group. It provides advisory, design, project delivery and managed services to the highways and transportation, local government, property, emergency services, health, education and utilities markets in the United Kingdom, the Middle East and Australia. It is the leading provider of repair and maintenance services to the UK strategic road network.

• The combination of Kier and Mouchel brings together Mouchel's leading position in strategic highways services with Kier's presence in the local authority roads market and creates a sector leader in the growing UK highways maintenance and management market.

• The Acquisition positions Kier to benefit from the new Road Investment Strategy (''RIS'') which sets out a long-term investment plan of £17 billion of total expenditure on the maintenance, renewal and enhancement of the strategic road network from 2015 to 2020, with annual expenditure increasing from £2.9 billion to £4.1 billion over the same period.

• The Board believes that the strategic rationale for the Acquisition is compelling and is aligned to Kier's Vision 2020, representing an excellent opportunity to accelerate Kier's strategy for growth in the infrastructure sector.

• Kier has agreed to acquire Mouchel for a total consideration of £265 million in cash from the Mouchel Sellers to be financed by a £340 million fully underwritten rights issue. Under the Rights Issue, New Shares will be issued at 858p per New Share on the basis of 5 New Shares for every 7 Existing Shares.

• The proceeds from the Rights Issue will also be used to repay Mouchel's net debt at the time of the Acquisition, finance the integration costs of the Acquisition and pay the costs and expenses associated with the Rights Issue and Acquisition. 

• Mouchel reported group revenue (including share of JVs) of £616.6 million and underlying operating profit of £27.7 million for the year ended 30 September 2014. Revenues for the three months ended 31 December 2014 increased by 38 per cent. compared to the same period in the previous year.

• The Acquisition is anticipated to deliver pre-tax cost synergies of approximately £10 million in the financial year ending 30 June 2017, with integration costs of the Acquisition expected to be approximately £17 million.

• The Acquisition is expected by the Board to be materially earnings enhancing for Kier for the financial year ending 30 June 2016, the first full financial year following Completion, and to deliver a ROCE of at least 15 per cent. in the financial year ending 30 June 2017. 

• The Acquisition creates an Enlarged Group with a pro forma combined order book of £9.3 billion (as at 31 March 2015), comprising Kier's order book of £6.5 billion and Mouchel's order book of £2.8 billion.

• Kier's current trading is in line with the Board's expectations.