Construction giant Balfour Beatty has landed a #32 million takeover of rival civil engineering firm Birse.
The two firms agreed a cash offer worth 16.625p a share - 23 per cent higher than Birse's 13.5p closing price on Friday.
Shares in Birse, which has a Birmingham rail engineering base and has worked on the #9 million upgrade of Wolverhampton station, leapt 2.75p to 16.25p as investors welcomed the news and closed up while Balfour Beatty shares drifted down 1.75p to 328p
London-based Balfour - it has the contract to build the #559 million Queen Elizabeth Hospital in Birmingham - said t he acquisition of its Lincolnshire rival would enhance its civil engineering work, particularly on the UK's railways as well as its coastal operations where it protects land from erosion.
Balfour chief executive Ian Tyler said the deal was a "substantial step" in the expansion and strengthening of its regional presence in civil engineering and building.
"We are confident that by bringing the two businesses together we can accelerate growth and improve performance," he said.
B irse chairman Peter Watson said the deal would allow it to take advantage of increasing opportunities in its main infrastructure markets.
"The offer will further support the positive momentum behind our businesses and provide value for Birse shareholders," he said. David Phillips, of Altium Securities, said consolidation of the sector was positive and the deal would be profitable for share-holders in 2007, the first full year following completion.
Balfour said that as well as improving its operations in coastal protection work for local authorities and on the railways, Birse would strengthen its skills in areas such as water.
It added that Birse's build-ing business, which focuses on educational work in the north of England, would be integrated into Mansell, Balfour's regional building arm.
The deal will also give Birse the financial support it needs to develop its operations.
The group said it offered significant growth potential based on the "strong strategic fit between Birse and Balfour Beatty's UK civil engineering business".
Balfour did not give any details about potential redundancies or savings, but said it expects Birse's management and staff "to play an important role in the further development of the enlarged business".
Balfour Beatty's UK civil engineering business does major infrastructure development projects and minor works for the public and private sectors.
In the year ended December 31, it had revenues including its share of joint ventures of #425 million and its overall order book at the end of 2005 exceeded #1 billion.
Birses' principal business is in civil engineering, with specialist skills in the coastal, rail and metro sectors and in plant hire. It is also a process engineer providing turnkey design and engineering services and solutions to customers in the water, power and nuclear sectors.
The company reported revenue of #340.5 million and pretax profit before exceptional operating items of #2.8 million in the year to April 30 2005.
But it made pre-tax losses of #9.9 million in the first half of this year compared with profits of #667,000.
The losses included a #4.5 million settlement paid to Citibank following a decision in 2001 to terminate a contract for a new data centre in London.