COSTAIN admitted defeat its in pursuit of road maintenance group May Gurney yesterday, saying it will not try to better Kier’s £221m offer.
The firm said “it does not believe that it would be in the best interests of Costain shareholders” to improve its bid, which will now lapse.
May Gurney, which on Wednesday recommended Kier’s bid, said it will put the takeover offer to shareholders on 7 May.
Costain had tabled a £177m tie-up package in late March and won support from 27 per cent of May Gurney shareholders, but Kier expressed an interest on the same day, and this week mounted a larger offer.
Kier offered synergies of £20m between the two firms over the next two years, bettering Costain’s estimated £10m savings.
Analysts at Liberum expect the deal to push Kier’s debts to a “relatively stretched” £185m by 2014.
The firm plans to fund its bid with a mix of cash and new shares.
May Gurney stock fell 1.75 per cent to 294.25p yesterday, below Kier’s offer of 315p per share.
The Aim-listed stock is trading at almost three times the levels seen last summer following a profit warning.