Outsourcer Mitie is to offload its social housing business to Mears Group in a deal worth up to £35 million.
Mears will take control of Mitie Property Management and MPS Housing for an initial payment of £22.5 million and then up to £12.5 million payable dependent on certain performance milestones.
The majority of the proceeds will be used to strengthen Mitie’s balance sheet and pay down some of the firm’s pension deficit.
The social housing unit provides property repairs and maintenance services, employs over 1,000 people, carries out over 265,000 responsive repairs each year, along with 25,000 repairs for critical services.
For its part, Mears said the deal will increase annual revenue by at least £100 million and the group order book by around £200 million.
Mears will also place 6.8 million shares at 331.5p to bankroll the transaction.
Mitie boss Phil Bentley said: “Mitie’s strategy is to focus on its core businesses and core clients, where service delivery and margin can be enhanced by the use of technology to deliver the critical environment reliability and cost efficiency that our clients increasingly demand from their ‘Connected Workspace’.
“The sale of MPM to Mears will allow Mitie to continue to focus and build scale in its core businesses. Mears is highly regarded in the social housing sector and has the specialist skills required to deliver to its client base.”
Mitie is in the second year of an overhaul under Mr Bentley, who has outlined plans to eventually slash annual costs by £50 million by 2020.
Mitie was forced to launch the wide-ranging turnaround plan after a string of profit warnings amid a torrid time for outsourcing firms following the collapse of Carillion in January.
Under the plans, Mitie is simplifying its corporate structure, outsourcing and automating some back office functions, merging its London offices into one and also investing to increase its technology capabilities.