Kier has agreed to buy Mouchel for £265m, creating a highways infrastructure superpower and expanding the number of services the combined firm can offer to local authorities.
Through purchasing Mouchel, which maintains a third of Britain’s highways network, Kier expects to create a combined company that will be a ‘sector leader’ in road management.
Kier plans to pay for the deal, including covering Mouchel's debt and the integration costs, through a £340m rights issue.
Combination of the groups is expected to create a firm with a £3.6bn turnover offering a wider range of facilities management and business process outsourcing services to local authorities.
The transaction is due to be completed in June, pending shareholder approval.
Mouchel’s chief executive, Grant Rumbles, who will stand down from the company when the deal is completed, 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 £2.8bn.’
Haydn Mursell, CEO of Kier plc added: ‘Over the last three years, Mouchel has been transformed into a strong business with market leading positions. The combination of Kier and Mouchel, particularly in the provision of UK highways maintenance services, creates a leader in a growing marketplace.
‘The acquisition is consistent with and accelerates the delivery of our Vision 2020 strategy and will provide compelling value to shareholders.’