Construction and regeneration group Morgan Sindall Group plc (MGNS.L) Friday said its affordable housing division, Lovell Partnerships, has reached an agreement to buy majority of the social housing business from integrated services provider Connaught plc (CNT.L) for GBP 28 million, saving 2,500 jobs at Connaught. Following news, shares of Morgan Sindall rose over 18% on morning trade, while Connaught shares dropped 12%.
The company said it paid a total cash consideration of GBP 28 million and acquired the majority of the ongoing contracts and related assets of the social housing division of Connaught, allowing essential maintenance services to continue without interruption. The construction group currently expects new contracts to generate about GBP 200 million of additional annual revenue.
John Morgan, Executive Chairman of Morgan Sindall 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."
According to Morgan Sindall, the acquisition would significantly enhance Lovell's position in the affordable housing sector and creates a national, full-service business delivering planned and reactive maintenance as well as new-build social and open market affordable housing.
The company said around 2,500 employees connected with the ongoing contracts would transfer to Lovell.
Earlier, in its interim management statement for the period from March 1 to July 7, Connaught had said that delays and reductions on certain capital works are affecting its social housing division. For the same reasons, Connaught had earlier revised its expectations for revenue and earnings for the current and next financial year.
At that time, Connaught had said that for fiscal 2010, it expects a substantial reduction in revenues and EBITA of about GBP 80 million and GBP 13 million respectively. It also had said that if the current trend is continuing, the effect for fiscal 2011 would be a reduction to expected revenues of GBP 120 million and EBITA of GBP 16 million.
MGNS.L is currently trading at 725.00 pence, up 63.50 pence or 9.60% on a volume of 40,513 shares on the London Stock Exchange.
CNT.L is trading at 16.65 pence, down 2.27 pence or 12% on a volume of 2.10 million on the LSE.
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