Shares in Mouchel were soaring on the FTSE All Share in morning trading after the outsourcing firm rejected a takeover offer from construction company Costain.

Costain offered a deal valuing Mouchel at 105.8 pence per share and said that there was a "compelling strategic rationale" for the takeover.

Earlier this month Mouchel said it had received a number of takeover offers, but added that it considered all of them to undervalue the company. The group has become something of a takeover target thanks to its share price falling in response to government cuts, which have led to a reduction in its potential for public sector contracts.

David Allvey, Chairman of Costain, said, "The Board of Costain believes that there is a compelling strategic rationale for combining Costain and Mouchel. In particular, it would provide the enhanced critical mass required by blue-chip customers who are increasingly moving to larger, longer-term bundled or multi-disciplinary solutions.

"The Board also believes that bringing together two of the UK's premium brands with major capabilities across consulting, construction and care, resulting in an order book of over £4 billion, would also create significant value for both sets of shareholders."

By 10:35 shares in Mouchel were up 25 per cent to 91.25 pence per share on the FTSE All Share, while Costain shares declined 1.82 per cent to 202.25 pence per share.

FTSE