Construction giant Kier has accepted a bid from Foster BidCo, a company owned by financier and investor Guy Hands, to acquire the group’s housing division.
Hands is the founder, chairman and chief investment officer of private equity firm Terra Firma, and his £110m offer for Kier Living is expected to be approved by shareholders at a meeting in May.
In the meantime, Foster BidCo has paid a non-refundable £40m deposit for Kier Group’s housing division and the acquisition is due to complete in June, according to a stock market filing.
Once the sale is completed, Kier Living is to rebrand as Tilia Homes.
A statement to the stock market from Kier said the sale of its housing arm would allow the group to “reduce its net debt” and “reduce the volatility of the group’s working capital”.
In addition, the disposal is aimed at “simplifying the group and allowing it to focus on its core, high-quality, market-leading businesses in infrastructure services, construction, and property”, according to Kier.
Andrew Davies, Kier Group chief executive, said: “The actions we have taken over the last two years have created a strong operational platform for sustainable profitable growth and free cash flow.
“The disposal of Kier Living delivers another key milestone in the group’s strategy to simplify the business and strengthen its balance sheet.”
Kier has been searching for a buyer for its housebuilding division since 2019, part of a strategy to reduce its debts.
That summer, following the appointment of Davies, the company said “the group’s portfolio is too diverse and contains a number of businesses that are incompatible with the group’s new strategy”.
Following a £225m pre-tax loss for the 12 months ended 30 June 2020, Kier Group reiterated its desire to sell Kier Living to generate cash to “fix its balance sheet”.
Kier is to publish its interim financial results for the six months ended 31 December 2020 on Wednesday 21 April 2021.