Outsourcers Mitie and Interserve are in advanced talks to merge their support services arms, which would create a group with more than 80,000 UK employees
Mitie is looking to buy Interserve’s facilities management business for around £250m, which is expected to be announced as soon as tomorrow when it is set to announce its full-year results.
It will fund the takeover of its rival with a £200m rights issue to help fund the deal and strengthen the balance sheet of the combined companies, Sky News first reported.
If confirmed, the deal would create the biggest operation in the UK, with a revenue of more than £3.5bn.
Earlier this year Interserve was plunged into fresh crisis after auditors red-flagged its finances, even before the UK was gripped by the coronavirus pandemic.
Accounts signed off at the end of February revealed a catalogue of concerns, which collectively “cast significant doubt” over its future.
Interserve employs more than 60,000 people worldwide and is one of a handful of “strategic suppliers” to the Government by maintaining scores of schools and hospitals as well as transport networks such as the London Underground.
Financial statements were belatedly signed off in February after directors secured a £125m cash injection from lenders. Almost £300m has been poured into the business to keep it afloat since creditors took control a year ago through a pre-pack administration.
Carillion’s high-profile collapse in January 2018 has knocked confidence in the outsourcing sector, heaping further pressure on companies such as Interserve and Mitie.
Just last week Capita announced plans to sell its education software business in a deal that could be worth as much as £500m as it continues to slim down its own operations.
The outsourcer said it will dispose of standalone software products that have little overlap with the rest of the group.
Mitie’s shares closed down 0.87pc on Wednesday to 80p, valuing the company at £293m.
Mitie and Interserve declined to comment on Wednesday night.