Shepherd Group is to sell a large chunk of its non-core operations to Wates Group in a deal that will enable Wates to expand in the North and allow Shepherd to focus on its core Portakabin business.
Shepherd, one of Yorkshire’s biggest family-owned businesses, described the deal as a “win-win“ for both sides. It is understood that all 1,250 staff employed at the businesses will transfer to Wates.
Wates is buy two of Shepherd Group’s built environment businesses, Shepherd Engineering Services and Shepherd FM, the facilities management company.
In addition Wates will also acquire a significant number of contracts and frameworks from Shepherd Construction.
York-based Shepherd said the proceeds will enable it to invest in its successful Portakabin business and continue its expansion in the UK and Europe.
It will also give it an exit from the low margin, high-risk construction sector.
Wates said the deal will create a UK leader in the construction and property services sector.
It added that Shepherd Construction and Wates have complementary geographical footprints across the UK.
David Williams, chairman of Shepherd Group said: “As a company with 125 years heritage, Shepherd Group has a strong history of adapting to market opportunities as they evolve.
“This deal would support our long-term growth strategy, providing exciting opportunities for the businesses retained in Shepherd Group as well as those involved in the proposed sale.“
He added that Shepherd Construction needs to scale up in order to capitalise on its full potential.
“Our aim is to ensure the best possible future opportunity for all our businesses – and that includes Shepherd Construction, Shepherd Engineering Services and Shepherd FM.
“This transaction would also enable Shepherd Group to focus future investment on significant sustainable development opportunities such as the continued expansion of our Portakabin business.”
Andrew Davies, chief executive of Wates, said: “The deal would form part of Wates Group’s long-term growth strategy to develop its construction and property services businesses nationwide and build on the success of the company’s recent acquisition strategy.
“The acquisition of Shepherd Construction’s capability, Shepherd Engineering Services and Shepherd FM would complement and enhance our existing construction and property services businesses, with access to additional areas of expertise in off-site construction, design for manufacture and assembly operations and expansion in new markets into the North of England.”
The transaction is subject to all necessary due diligence being completed and the terms of the deal were not disclosed.
The news comes a day after Shepherd announced plans to make 55 staff redundant at its Shepherd Construction business following a long-term review.
Shepherd said the reduction in headcount was necessary to support an anticipated reduction in 2015/16 revenues to ensure a sustainable business going forward.
Shepherd said: “Following a review of the Shepherd Construction business, along with its support service teams, a consultation process with employees has now concluded.
“As a result of this process we can confirm that we have made 37 compulsory redundancies, with an additional 18 employees taking voluntary redundancy.
“We are doing everything possible to prioritise the welfare of staff affected, and ensure our effectiveness as a leading built environment specialist.”
Shepherd Construction employs 300 staff.
Two weeks ago Shepherd announced the sale of Shepherd Homes, a leading regional house builder, to Galliford Try, which will add Shepherd Homes to its house building business, Linden Homes.
Contracts have been exchanged and the sale of Shepherd Homes, which includes six current sites and five sites in planning, is expected at the end of May.
Shepherd Homes employs 60 people and the firm said they are expected to transfer to Linden Homes once the deal is completed.
Shepherd is keen to focus on its Portakabin business, which makes prefabricated, portable and temporary buildings for offices, schools and hospitals.
In its latest annual results, Shepherd said earnings at Portakabin leapt by nearly a third and results for Shepherd Engineering Services, Shepherd Homes and Shepherd FM were all “encouraging”.
However the performance at Shepherd Construction and Shepherd Group Engineering was described as disappointing and the group said “decisive mitigating action” has been taken.