Morgan Sindall’s affordable homes division Lovell has struck a £28m deal to buy the majority of Connaught’s ongoing social housing contracts, according to the Construction Enquirer website.
The sale, finalised with Connaught’s administrator KPMG, will see 2,500 staff transferred from Leed-based social housing division Connaught Partnerships to Lovell. It will provide the company with £200m of new revenue split broadly between response maintenance contracts and planned maintenance work under the Decent Homes programme.
Morgan Sindall chief executive John Morgan, said: “This is a step change for Lovell. The acquisition significantly increases the scope and scale of our planned and reactive maintenance activities and further develops our market leading position …Our focus now will be to ensure a smooth handover of the contracts and to minimise disruption to essential maintenance services.’
The administrators are now working to sell Connaught Partnerships’ remaining contracts to rival companies or to councils wanting to take them back in-house. It’s expected that many of the subsidiary’s 1,900 remaining staff will also transfer through the deals.
The news came just two days after its banks put Connaught into administration, rejecting a three-year rescue plan that would have required a £50m cash injection within a month, a source told Building.
Connaught first hit financial difficulties in June this year when it issued a profits warning, then requested £15m of short-term funding from its banks – led by RBS – to tide it over.
It is understood the £50m rescue deal would have involved injecting £30- 40m into the social housing part of the business, and £10m into other parts of the PLC.
However, the compliance and environmental arms of the group remained profitable and escaped administration, and will be hived off into a separate vehicle until a buyer is found.
But talks with lenders ended without resolution and KPMG was subsequently appointed as administrator for Connaught plc and Connaught Partnerships. Building’s source said: “What it came down to in the end was that the lenders didn’t have confidence in the recovery plan. Quite a significant turnaround was needed and they baulked at putting in another £50m in the next month or so.”
