Costain Regulatory News (COST)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM THE UNITED STATES OF AMERICA OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

Costain Group PLC

("Costain" or the "Company")

Statement regarding Mouchel Group plc's ("Mouchel") response to Costain's revised approach

The Board of Costain is surprised by Mouchel's response to Costain's significantly enhanced proposal which, based on Costain's closing share price on 5 January 2011, values each Mouchel share at 135p per share, a premium of 138.9 per cent. to the closing Mouchel share price of 56.5p immediately prior to Mouchel entering the current offer period on 6 December 2010.

This decision by the Board of Mouchel denies its shareholders the opportunity to have a major stake in a well capitalised, financially efficient, enlarged business, with a clear strategy for future profitable growth.

Enquiries:

A copy of this announcement will shortly be available, free of charge, on the Company's website at www.Costain.com

Investec (which is authorised and regulated in the United Kingdom by the Financial Services Authority) is acting exclusively for Costain and for no one else in connection with the possible offer and will not be responsible to anyone other than Costain for providing the protections afforded to Investec clients nor for providing advice in relation to the possible offer or any other matters referred to in this announcement.

This announcement does not constitute an offer to purchase any securities, or an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any offer to purchase or sell securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. No offering of securities may be made in the United States except pursuant to registration under the US Securities Act of 1933 or an exemption from registration.

The release, distribution or publication of this announcement in jurisdictions other than the UK may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the UK should inform themselves about and observe any applicable requirements. If you are resident outside the UK, you are responsible for first satisfying yourself as to the full observance of the laws and regulatory requirements of your jurisdiction.

Unless otherwise determined by Costain, this announcement and any proposed offer will not be made, directly or indirectly, in or into any jurisdiction where to do so would violate the laws of that jurisdiction (a "Restricted Jurisdiction") or the United States, or by the use of any means or instrumentally (including, without limitation, telex, facsimile transmission, telephone, internet or other forms of electronic communication) of interstate or foreign commerce, or of any facility of a national securities exchange of any Restricted Jurisdiction or the United States. Unless so determined by Costain, the proposed offer will not be capable of acceptance by any such use, means or instrumentally or facility of any Restricted Jurisdiction or the United States.

Copies of this announcement and documents relating to any offer will not be, and must not be, directly or indirectly, mailed or otherwise forwarded (including, without limitation, by telex, facsimile transmission, telephone, internet or other forms of electronic communication), distributed or sent in, into or from any Restricted Jurisdiction or the United States.

Forward looking statements

This announcement contains statements about Costain and Mouchel that are or may be forward looking statements. All statements other than statements of historical facts included in this announcement may be forward looking statements. Without limitation, any statements preceded or followed by or that include the words "targets", "plans" "believes", "expects", "aims", "intends", "will", "may", "anticipates", "estimates", "projects" or words or terms of similar substance or the negative thereof, are forward looking statements. Forward looking statements include statements relating to, among other things: the expected benefits of the proposed combination of Costain and Mouchel.

Such forward looking statements involve risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward looking statements, including, among others, risks relating to the successful combination of Mouchel with Costain; higher than anticipated costs relating to the combination of Mouchel with Costain; and facts relating to Mouchel that may impact the timing or amount of benefit realised from the combination that are unknown to Costain. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements, which speak only as of the date hereof. Costain disclaims any obligation to update any forward looking or other statements contained herein, except as required by applicable law.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129.