UK contractor Kier has announced that it has reached an agreement to buy rival contractor Mouchel for $409m (£265m) in cash. The purchase means that Kier will also take over contracts to maintain 44,000km of Britain’s roads.
Kier said it will fund the deal with a $520m rights issue. The surplus money will cover Mouchel’s $60m net debt and $63m in pension liabilities.
Kier chief executive Haydn Mursell said: "The combination of Kier and Mouchel, particularly in the provision of UK highways maintenance services, creates a leader in a growing marketplace."
Mursell, who took over as Kier chief executive last June, has said he wants to expand the company’s road and maintenance business, which currently receives $450m a year from the Highways Agency.
He said: "Over the past three years, Mouchel has been transformed into a strong business with market leading positions. The acquisition will provide compelling value to shareholders."
Kier’s shares rose 4% on news that the deal had been finalised.
The deal, which had been widely expected, marks the end of Mouchel’s 118 years as an independent company. It was founded in 1897 by a French immigrant to the UK who had an idea for a new kind of reinforced concrete.
In latter days it was one of those hardest hit by the global recession after undertaking a buying spree intended to diversify its workload in the noughties.
The firm, which employs 6,500 staff in the UK, Australia and the Middle East, went into administration in 2012.Â
Grant Rumble, the chief executive of Mouchel, said: "Kier and Mouchel are an excellent fit. The enlarged company will enable us to improve our offer to customers and to enhance the career opportunities of our employees.
"This deal is testimony to the successful turnaround of Mouchel following its 2012 restructuring. Refocusing the business on its core strengths and targeting profitable growth has brought us to a position where our order book is now more than £2.8b [$4.7bn]."
Image: No job too small: Kier will be taking over 44,000km of roads both great and smallÂ (Source: Wikimedia Commons)