The contractor said the takeover, which is expected to deliver annual cost savings of £10m, will be financed by a £340m fully underwritten rights issue.

The acquisition, which is subject to the approval of shareholders, creates an enlarged group with a combined order book of £9.3bn.

Mouchel provides advisory, design, project delivery and managed services to the highways and transportation, local government, property, emergency services, health, education and utilities markets in the UK, the Middle East and Australia.

The company, which employs more than 6,500 staff, reported revenues of £596.4m for the year ended 30 September 2014. Its underlying operating profit was £27.7m.

Mouchel has UK sites in London, Woking, Bournemouth, Bristol, Birmingham, Lincoln, Liverpool, Manchester, Oldham, Middlesbrough, Scotland, Belfast and Dublin. The deal comes less than three years since Mouchel exited administration.

Haydn Mursell, chief executive of Kier, said: “Over the last three years, Mouchel has been transformed into a strong business with market leading positions.

“The combination of Kier and Mouchel, particularly in the provision of UK highways maintenance services, creates a leader in a growing marketplace.”

Grant Rumbles, chief executive of Mouchel, added: “Kier and Mouchel are an excellent fit.

“The enlarged company will enable us to improve our offer to customers and to enhance the career opportunities of our employees.

“This deal is testimony to the successful turnaround of Mouchel following its 2012 restructuring. Refocusing the business on its core strengths and targeting profitable growth has brought us to a position where our order book is now more than £2.8bn.”

In December last year, Kier confirmed preliminary discussions had taken place regarding the possible acquisition of the infrastructure firm, which was forced into administration in 2012, while in February 2015, the group warned that a deal was still uncertain.