Balfour Beatty in talks to buy £70m-turnover Multibuild

Balfour Beatty is in talks to buy failed northern contractor Multibuild, with a deal possible within a week.

It is understood that Balfour is in exclusive talks to buy the £70m-turnover firm, which went into a company voluntary arrangement (CVA) in December after running into financial difficulties.

A deal would bolster Balfour’s presence in the lucrative budget hotels market, and would increase its capacity for fit-out work in areas such as education. A source close to the situation confirmed that Balfour was in talks with the Stockport-based company, but emphasised that “it could still go either way”.

It is understood that some parts of Multibuild, which suffered from problem contracts, would be closed down if a deal went ahead, with Balfour taking the rest of the group. Balfour is expected to pay a minimal sum for the company, with one source saying it could go for “significantly below £10m”.

Sources said they expected most of Multibuild’s senior management to remain with the business. According to its last accounts, it employed 156 people.

A deal for the firm, founded by chief executive Mike Peden and director Tony Short in 1983, would be the second time Balfour has swooped for a regional contractor within a month, after its surprise £10.3m purchase of South Yorkshire-based Strata Construction on Christmas Eve.

Balfour is expected to pay a minimal sum, and it could go for ‘significantly below £10m’

It is understood that Balfour, which earlier this month reached financial close on the £450m Blackburn and Darwen Building Schools for the Future scheme, would use Multibuild to do interiors work on some of its education jobs in the Manchester region. The smaller firm also has a strong reputation with companies including Whitbread and Travelodge in the budget hotels sector.

A statement from Multibuild’s directors, filed at Companies House on Christmas Eve, stated that they had “resolved to wind up the company” once its CVA ended. The accounts for the year to 30 September 2008, the latest available, showed a pre-tax loss of £4.4m compared with a pre-tax profit of £1.1m the year before. The CVA is being handled by insolvency specialist Leonard Curtis.

Multibuild blamed its problems partly on two unnamed major contracts, which had been hit by delays after difficulties with the supply of modular units.

A source at a rival contractor said: “It obviously had some jobs that didn’t go well, but I think it stretched itself a bit, too. If you do that, you lose some of the controls in the business.”

Balfour Beatty declined to comment.