Bosses with major Midlandsbased social housebuilder Bullock Construction have clinched a buy-out deal to snap up the company for #42.2 million.
Parent company Montpellier Group said yesterday the sale of the subsidiary had been agreed, conditional to shareholders agreement.
The buy-out team was led by Bullock managing director John Gaffney.
The company specialises in partnership projects in the social housing sector and has recently completed more than 1,000 homes at Castle Vale, Mr Gaffney said.
He declined to add to a Stock Exchange statement issued yesterday other than to say Bullock was an expanding company.
Montpellier said the total proceeds of the sale included #23 million goodwill.
After repayment of intragroup debts, Montpellier will receive net cash of #22 million, which will provide resources to develop the remaining businesses and strengthen the balance sheet.
It said losses in 2004, partly caused by provisions against problem contracts, together with delays in property sales, had ?weighed heavily on the group?s financial position, making it difficult to compete successfully for new business and support ongoing trading.?
In the sale of Bullock, the board received approaches from a number of parties in addition to the management team, including a venture capital group and some of its trade competitors.
It concluded that a disposal of Bullock to its management team ?provided fair value and the highest degree of certainty both to shareholders and the group as a whole?.
Roy Harrison, Montpellier executive chairman, said the group?s new board inherited a business which subsequently proved to have a number of issues, including major legacy contract exposures and inappropriate property valuations.
Together with the group?s pension deficit, they resulted in a drain of more than #30 million on the group?s finances.
Substantial progress had been made in resolving the issues but they had ultimately threatened the ability of the group?s subsidiary companies to ? trade competitively, despite having made considerable progress in implementing good controls mechanisms throughout the group, and reducing its risk profile while improving the quality and focus of its order book?.
Having explored a number of avenues to resolve the group?s resulting financial difficulties, the board received an approach from the management of Bullock.
He said: ?After assessing several competitive approaches, we considered this to be an attractive solution, sufficient to resolve all remaining legacy issues and immediately provide the group with the necessary financial security to support the remaining businesses and provide certainty to all our stakeholders.?
Montpellier said its end of July order book was #226 million, reflecting the downsizing and closure of certain problematic businesses.
The group?s partnered building operations consist of a number of specialist construction businesses ? Allenbuild, Britannia, Walter Lilly, YJL London and YJL Infrastructure ? each of which operates in niche market sectors and benefits from strong regional brands.
All of these businesses were well positioned to take advantage of good market opportunities and, following the reorganisation of Allenbuild, are winning new work through partnering agreements with key clients in both the public and private sectors, the group said.
In line with the group?s refocusing, the order book as at July 31 2005 was #226 million, reflecting the downsizing and closure of certain problematic businesses.