£3bn Government contractor may be sold after collapse
INTERSERVE, a key contractor to the Government owned by its lenders since it collapsed in March, could be broken up and sold off.
City sources said the owners of Interserve had asked longstanding corporate finance advisers at Lazard to sound out potential buyers for some or all of the £2.9 billiona- year group with a view to beginning a formal sale process as early as next month.
Interserve has 45,000 UK staff and thousands of public and private sector contracts, including with hospitals, the police and military.
The company was listed on the London Stock Exchange, but fell into administration after racking up £735 million of debt. Lenders, including Royal Bank of Scotland, HSBC and hedge funds, agreed to write off its loans in return for ownership of the business.
One source said the ownership structure may limit Lazard’s options, adding: ‘Interserve now has quite a few different shareholders with different agendas, so it’s not clear what is going to happen.’
Interserve has three divisions: support services, equipment services including RMD Kwikform and construction. On Friday, reports suggested Interserve had asked some of its owners to provide more debt financing for RMD Kwikform in return for a bigger shareholding in the division. It is considered the best performing unit.
Interserve makes two-thirds of its turnover from Government contracts, including hospital cleaning, school meals, maintaining military bases abroad and running probation services. One of the most recent deals secured was part of a £600 million, two-year contract for discharging patients from hospitals. Interserve was one of 16 suppliers named on t he contract, which involves moving patients from acute care into care homes or back to their own homes.
Other key wins were a £66.7 million contract with the Crown Commercial Service – the Government’s procurement agency – in July last year. The outsourcer also secured a £31.4 million contract in January last year to supply equipment and engineering services to London’s Metropolitan Police until 2028.
The Government will take a keen interest in any break-up to ensure vital services are not disrupted.
A spokesman for Interserve said: ‘We do not comment on speculation. Our relationship with Lazard is not new. It has been an adviser to our shareholders for some time. We remain focused on being a strong partner to customers, delivering the best service possible.’
The outsourcing industry has been criticised for taking on too many contracts that make poor returns. Rival contractor Carillion collapsed in January 2018 after buckling under a huge debt pile.
MPs called the failure of Carillion ‘a story of recklessness, hubris and greed – its business model was a relentless dash for cash’.
City sources said predators including Serco and Sodexo were already circling Interserve with a view to buying bits of the group.
Mitie is said to be interested in procuring Interserve’s support services division for £100 million, but sources close to Interserve suggested it would have to pay far more.