The construction arm of Skye Bridge contractor Miller Group has been sold to massive UK building group and Queensferry Crossing consortium member Galliford Try in a deal worth £16.57 million.
Edinburgh housebuilding heavyweight Miller Group yesterday said it was “pleased” to announce the sale of a division which lost £4.6m on turnover of £408m last year, as it seeks to concentrate all its efforts on an expanding commercial and domestic property market.
Galliford said its directors believed the acquisition which doubles the newly-enlarged group’s major projects order book to £2.8bn, includes gross assets recently valued at £232m, and also features £23m in cash came at a “very attractive valuation”, with the company effectively pocketing £6.5m in the exchange.
Privately-owned Miller’s disposal of its infrastructure arm comes amid reports that the group, which had slimmed its debt pile to around £170m at the December year-end, is preparing to float on the stock market.
Chairman Philip Bowman said the deal would provide a “strong foundation” for the division, allowing it to become more competitive.
“It will also enable the Miller Group to concentrate all its efforts on expanding its property interests now that the housing and commercial property markets are again showing strong signs of growth,” he added.
The acquisition will see Galliford which trades as Morrison Construction in Scotland grow divisional turnover towards £1.25bn and increase its 2018 sales target to around £1.5bn.
“The tactical acquisition of Miller Construction is consistent with Galliford Try’s stated strategy of disciplined and selective growth in its construction business, with a particular focus on developing our positions on regional and national frameworks,” a company statement said.
Chief executive Greg Fitzgerald was “delighted” to reveal an agreement at a “very good price”.
He said the outcome, announced just hours after Galliford told markets annual profits for the year to June would be at the top end of expectations, was a “tremendous opportunity” for both businesses.
Miller Construction has been seeking to improve its performance, exiting loss-making contracts and aligning itself with more profitable longer-term relationships.
Earlier this year it hailed new framework agreements with SSE and the Ministry of Defence, and repeat orders from clients including Network Rail received last year.
It has since added schools and public buildings deals in the north east of England and north Wales to a portfolio of agreements which also includes work for the north of Scotland hub.
“Our current strategy until 2018 is to selectively grow our construction business, and the acquisition of Miller Construction is a significant step down that path for us,” Mr Fitzgerald said.
“The acquisition brings together two construction businesses with a strong strategic fit and accelerates our strategy of growth into an improving marketplace.”
Galliford said Miller has a public-private portfolio with an invested value of £14m, and added that it has already identified a total of £7m per annum of cost synergies with the majority realisable by the end of the present financial year.
It earmarked £4m in one-off restructuring costs, but said the acquisition would be earnings enhancing by the end of the period.
Investors reacted positively to the news, with analysts at HSBC upping profit estimates. Stock in Galliford closed the day up 4% or 47p at 1,213p.