Mouchel said that Interserve鈥檚 offer was 鈥渟ignificantly reduced鈥� after due diligence. Having run through the books, Interserve鈥檚 revised offer valued each Mouchel share at 135 pence, including 50 pence in cash. Mouchel rejected this bid, saying that it 鈥渟ignificantly undervalues the business鈥�.
Mouchel has also explained why it rejected an earlier bid from Costain: 鈥淐ostain's proposal has an unacceptably high level of execution risk to warrant further discussions.鈥�
On 21 January Costain offered 153.2p per Mouchel share plus Costain dividends for 2010. On 17 February, after some initial due diligence, Costain reduced its proposal to 0.5531 Costain shares and 22.25 pence in cash and with no entitlement to any final dividend.
Costain has already said it will not bid again for Mouchel. Now Interserve has also said that it too will walk away and not up its offer.
In rejecting both offers, Mouchel said: 鈥淎ny such discussions would also entail a further period of uncertainty and disruption to the business. Accordingly, and having consulted a number of Mouchel's largest shareholders (who, in total, represent over 50% of Mouchel's issued share capital), the board has decided it is not in shareholders' interests to proceed with any further discussions with Interserve or Costain.鈥�
It added: 鈥淭here can be no certainty at this stage whether any offer will be made by either Interserve or Costain or as to the terms of any offer which might be made.聽 Accordingly, the company remains in an offer period for the purposes of the City Code on Takeovers and Mergers.鈥�
Mouchel chief executive Richard Cuthbert said: 鈥淎lthough we can see some benefit, in the current environment, from being part of a larger group, the significant integration risks and the prospective valuation meant that we were unable to recommend the transaction to shareholders.鈥�
Interserve chief executive Adrian Ringrose said: "Following several weeks of due diligence we put a revised proposal to the Mouchel board that we believe was in the interests of both Interserve and Mouchel shareholders. Following Mouchel's decision not to proceed with that proposal we will be focusing on implementing our plans to deliver value for Interserve shareholders through the medium term growth of our business, as outlined in our recent annual results presentation."
Mouchel also today published its results for the six months to 31 January 2011, which showed a 13% drop in first-half revenues to 拢270.3m, a 55% drop in underlying operating profits to 拢拢8.9m and a 73% drop in underlying operating profits before tax and exceptional items to 拢4.1m.
Commenting on the first-half results, Mr Cuthbert said: "It has been another challenging period for Mouchel. Our clients have been impacted by the tough economic climate, leading to cuts in capital and maintenance programs and a decline in spending, which has negatively affected our performance. Furthermore recent corporate activity has been an unwelcome disruption to our business. We are nevertheless trading broadly in line with our expectations.鈥�
While short term conditions remain difficult, Mouchel鈥檚 directors still believe that, with public spending cuts driving the trend towards outsourcing, 鈥渋n the medium and longer term, the outlook for Mouchel is compelling鈥�.
The board added: 鈥淲e remain confident in Mouchel's prospects as an independent business.鈥�
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