(Rewrites throughout.)

By Simon Zekaria

LONDON--Kier Group PLC (KIE.LN) said Tuesday it is buying international infrastructure services and business services group Mouchel for just over $400 million, creating a market leader of road maintenance in the U.K.

The deal, at 265 million pounds ($405 million) in cash for the entire share capital, is funded through a GBP340 million five-for-seven rights issue at 858 pence, said Kier, a property, residential, construction and services group. Mouchel provides advisory, design, project delivery and managed services to the highways and transportation, local government, property, emergency services, health, education and utilities markets.

Kier, which is taking on Mouchel's GBP39.5 million net debt and GBP44.6 million pension deficit, expects to deliver pretax cost synergies of GBP10 million from the acquisition in fiscal 2017, with integration costs of around GBP17 million.

The acquisition is expected to be materially earnings enhancing for Kier for the year ended June 30, 2016, the first full financial year following completion, it said, adding that the enlarged group will have a combined order book of GBP9.3 billion. The acquisition is expected to complete in June.

The two businesses combined will service about 44,000 kilometers (27,340 miles) of all U.K. roads.

Kier operates in the U.K., the Middle East and Hong Kong, and the deal for Mouchel adds a fourth territory to its combined operations--Australia, said Kier Chief Executive Haydn Mursell, even as he said the acquisition is focused on business in the U.K.

"There is an international flavor, but the bulk of the group is U.K.-focused," said Mr. Mursell in an interview. Mr. Mursell will be CEO of the expanded group, with Mouchel CEO Grant Rumbles stepping down.

Still, Kier is ready to expand abroad. Mr. Mursell said Kier has a GBP200 million revenue business overseas, with a target for it to grow toward GBP500 million. The Mouchel acquisition adds another GBP100 million to that total, the CEO added.

Mr. Mursell also said the company is neutral about the political result of next month's election in the U.K., given that there are clear provisions set down for spending on maintaining and building road infrastructure in the U.K., valued at GBP17 billion over the next five years. However, that spending is also under control, which also promotes businesses for outsourcing firms like Kier, he added.

"We have got hard visibility. That provides huge reassurance," he said. "All the businesses that sit within our portfolio will benefit from the current economic position of the country."

Still, Mr. Mursell said construction markets are also looking for political stability. "The less change there is the better," he said. "There is less of a hiatus around large capital works."

Mouchel's operating profit rose 22% to GBP24.2 million on an 11% rise in revenue to GBP617 million in the year ended Sept. 30 2014, reflecting an improvement in its fortunes after it fell into administration in 2012, which saw it be acquired by three banks-- Royal Bank of Scotland Group PLC (RBS.LN), Barclays PLC (BARC.LN) and Lloyds Banking Group PLC (LLOY.LN).

"I am confident in the current robustness of Mouchel," said Mr. Mursell, adding the price paid is a result of good negotiations.

At 1102 GMT, Kier shares were up 0.4% to 1,631 pence.

Write to Simon Zekaria at simon.zekaria@wsj.com. Ian Walker contributed to this article.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires