Mitie cuts price for Interserve arm acquisition

Outsourcing giant Mitie has slashed the price it will pay for rival Interserve’s facilities management arm by nearly a third to around £190 million under final terms for the deal.

Mitie had previously agreed a £271 million cash and shares acquisition of the business in June.

It said it will still pay £120 million in cash, but will now cut the stock element by 31% to 248 million shares, leaving Interserve shareholders with a 17.5% stake in the combined group – against 23.4% under the initial deal terms.

Shares in Mitie lifted more than 5%.

The move comes as the deal is also being investigated by the Competition and Markets Authority (CMA) amid possible concerns over the tie-up.

But Mitie said it was hoping to complete the acquisition at the end of the month if it gets CMA clearance.

Phil Bentley, chief executive of Mitie, said: “Reassuringly both Mitie and Interserve facilities management have traded better than expected during the Covid-19 crisis.

“However, Mitie in particular has been successful at renewing strategic contracts and winning new business during this period.

“Recognising this momentum, we have renegotiated the terms of the Interserve facilities management transaction, reducing the vendor’s consideration shares by 31%.”

He added: “Mitie’s existing shareholders will therefore hold a greater proportion of the enlarged group and enjoy a greater share of the benefits of the transaction.”

Mitie also revealed aims for another £5 million in cost savings from the takeover, bringing the total to £35 million.

Mitie announced the deal in June, which would create what the companies say is the biggest facilities management expert in the UK, with more than 77,500 employees.

For Mitie, the deal will see it get a business with a strong presence in the government and defence sector, while it will be able to save costs by combining the businesses.

The deal will meanwhile give Interserve a chance to pay down its debts, give cash to its shareholders and stabilise its finances.

In a separate trading update on Wednesday, Mitie said it did not plan to pay out an interim dividend despite seeing group revenues rise 12% quarter on quarter to £514 million in the three months to September 30.

Overall first half revenues dropped 9.8% to £972 million, although part of this is due to the previously announced loss of a contract with the Ministry of Justice and the reduced scope of a properties contract with the National Health Service.