Costain merger silence

Costain has found itself playing a cat and mouse game over whether it could merge with Philipp Holzmann after selling several of its US mining businesses for œ62 million to an off-shoot of the German giant.

Costain's own broker, NatWest Securities, forecasts a œ95 million loss at the March finals, after a œ71 million provision against US business sales. It also predicts the group will need to reshape or merge even after it has successfully sold its remaining US mining companies.

The broker said: 'Following the divestment of coal, the group will be in a stronger position compared to some others within the industry and should be able to reshape itself or choose its preferred partner, rather than be pushed into an unsatisfactory structure. Press speculation has cited a number of possible permutations.'

Top of the list is Holzmann, which already owned a 20% stake in Dolet Hills, one of the businesses divested in last week's deal. Hochtief and a number of French contractors are also considered possible partners, while at home Balfour Beatty, Bovis and Amec have been touted as candidates.

A Costain spokesman said the group was refusing to comment on the grounds that any remark whatever would be misconstrued.