Morgan Sindall in Connaught buy-up

By This Is Money
Updated: 08:47 EDT, 11 September 2010

More than 2,500 jobs have been saved after building firm Morgan Sindall snapped up the majority of contracts from failed social housing maintenance group Connaught.

John Morgan: says 20% of Connaught’s contracts were badly priced

And a further 1,000 positions are likely to be secured this weekend as Mears ties up an agreement to take over eight maintenance deals.

But it was not all good news for the stricken firm, as 700 workers were axed by Connaught's administrators KPMG.

To make matters worse, large numbers were given the news over the phone, while others found out when turning up for work yesterday morning only to discover the depot gates were locked.

Jim Woods, of construction union UCATT, said: 'Why should workers be told this way? They should be called KGB not KPMG for the way they have conducted themselves.'

Morgan Sindall is not taking on Connaught's 12 biggest contracts, including its largest deal to maintain housing stock for Norwich City Council, because the company considers them to be loss-making.

The business spent £28m to buy around 100 contracts from Connaught, which it hopes will generate £200m a year for the firm.

The contracts, which account for 80% of Connaught's deals, will be transferred directly into Morgan Sindall's affordable housing division, Lovell.

John Morgan, executive chairman of Morgan Sindall, said his firm only took on 80% of Connaught's contracts because he felt the rest were badly priced. He added: 'This deal will transform our social housing business and make us the biggest social housing group in the country.'

KPMG is still in talks with rivals to sell off the remaining contracts, but could not confirm what will happen to other Connaught employees in the troubled social housing division. Connaught's compliance and environmental businesses continue trading, but it is understood they will be sold off in the coming weeks.

Shares in Morgan Sindall shot up following the announcement, closing up 47p at 708.5p – a year high.

Howard Seymour, of Numis Securities, said: 'It doesn't look like they are over-paying. Lovell is known as a new-build business, so this gives them a foothold into a new market. I think the concerns are there was a very short due diligence period of just 36 hours.'

Housing group Mears, which was also in the running for the contracts, said it is continuing to negotiate to take on some work.

Chairman Bob Holt said: 'We've already picked up a number of contracts with local authorities, who have approached us directly and we will be looking at picking up the remaining contracts next week.'