Services firm May Gurney has reached agreement to merge with engineering firm Costain, subject to shareholder approval, in a deal worth around 178 million.
Both companies have activities in the waste sector, with Norfolk-based May Gurney currently holding 20 waste collection contracts across the UK.
The deal will see the two companies join together to form Costain May Gurney Plc, which it is hoped, will give both organisations a greater geographic footprint in the UK and will enable them to offer a wider range of services to clients.
May Gurney currently operates many waste and recycling collection contracts with local authorities including Bath and North East Somerset, West Oxfordshire and Bridgend borough councils as well as offering services such as street cleansing and highway and rail network maintenance.
In September 2012, the company issued a profit warning citing serious operational issues with two of its kerbside sort recycling collection contracts. The difficulties also resulted in chief executive Philip Fellowes-Prynne stepping down (see letsrecycle.com story).
Costain currently holds the construction contract for Viridor Laings long term-waste disposal contract with the Greater Manchester Waste Disposal Authority (GMWDA).
Procurement
The company also joined Irish construction firm Quinn Group in its bid for the aborted SWAMP2008 waste procurement in Northern Ireland, and partnered with waste management firm Shanks Group in an unsuccessful bid for the 800 million waste treatment contract for the Essex Waste Partnership (see letsrecycle.com story).
The combined Groups headquarters will be located at Costains head office in Maidenhead, although May Gurneys office in Trowse, Norfolk will be the operational office for the groups operations in East Anglia.
David Alley, non-executive chairman of Costain, said: The Costain strategy has been extremely clear: to become a leader in the design, delivery and maintenance of national infrastructure. The announcement today is a highly significant step in that process. Together with May Gurney, we will have the added experience and skills to underline our leadership status and to provide a platform for new growth and success.
We see this coming together of two established UK companies as good news for all our stakeholders. Our customers are increasingly demanding a broader range of integrated services and this powerful combination will enhance our status as a Tier One engineering solutions provider.
Management
Should the deal be formally approved, Costain shareholders will own 53% of the Group, with May Gurney shareholders owning the remaining 47%. The combined company will be led by Costain chief executive Andrew Wyllie.
Integration of the two companies is expected to take around 18 months, but both firms have reassured clients that business will continue as usual during the changeover. Branding for both companies will also be retained.
Baroness Margaret Ford, non-executive chairman of May Gurney, said: May Gurney and Costain have highly complementary businesses. The markets in which we operate offer tremendous opportunities for future growth. The combination of our two companies and the strong heritage we bring will position us very well to respond to those opportunities.
Our objective is to deliver even stronger partnerships with our clients, superior returns for our shareholders and increased opportunities for our staff.
The deal represents further consolidation in the services sector, coming just a month following after services firm Enterprise was purchased in a 385 million deal by Ferrovial, the Spanish parent company of waste management firm AmeyCespa (see letsrecycle.com story).
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