Kier set to acquire Mouchel for £265m

LONDON (ShareCast) - Property and construction services company Kier Group (LSE: KIE.L - news) has reached an agreement to acquire infrastructure repair and maintenance services group Mouchel for £265m. The FTSE 250 group said the deal for the UK-based group will be backed by a £340m fully-underwritten rights issue, adding it will offer shares at 858p per share on the basis of five new shares every seven existing shares held.

The proceeds are expected to be used to repay Mouchel's debts as well as the integration costs of the deal.

Kier expects the deal to put it in a position from which it would benefit from the Road Investment Strategy in the UK, which will see £17bn committed to a long-term investment plan to maintain and renew the UK's road network over the next five years.

London-listed Kier said the agreement is expected to provide pre-tax synergies of around £10m in the financial year to the end of 2017 June, with integration costs expected to be approximately £17m.

"Over the last three years, Mouchel has been transformed into a strong business with market leading positions," said group chief executive Haydn Mursell.

"The acquisition is consistent with and accelerates the delivery of our Vision 2020 strategy and will provide compelling value to shareholders." Analysts at Westhouse Research said the deal was a "good strategic fit", adding the group's £150m net debt for June 2015 was likely to be unchanged but associated with a larger group.

Kier shares were up 1.05% to 1,642.00p at 09:46 on Tuesday.