Foster BidCo Limited will pay £110 million in cash for Kier Living Limited on completion of the transaction, which is expected before mid-June.

The sale is conditional on Kier shareholders’ approval at a General Meeting expected to occur in early May.

There will be additional payments made on completion to cover, among other things, Kier and its subsidiary and associated undertakings providing working capital funding to Kier Living in the period from 1 July 2020 until completion.

Investor Guy Hands has paid a non-refundable deposit of £40m to Kier, held in escrow and to be released on completion. The balance of the consideration and the working capital funding will also be paid at completion.

Kier Living’s principal focus is providing well-priced, low-rise, mixed-tenure suburban family homes through open-market sales.

Kier’s board said the transaction recognises the strategic value of Kier Living and is in the best interests of shareholders and other stakeholders as a whole because it will facilitate a material reduction in the group’s net debt, reduce the volatility of the group’s working capital and remove the capital requirement to support land acquisition within Kier Living to maintain its current level of sales completions.

The sale will also remove the off-balance sheet debt associated with certain of Kier Living’s joint ventures; and simplify the group and allow it to focus on its core, high-quality, market-leading businesses in Infrastructure Services, Construction and Property.

Kier said it is also continuing to consider a potential equity raise.

Andrew Davies, Kier Group chief executive officer, said: “The actions we have taken over the last two years have created a strong operational platform for sustainable profitable growth and free cash flow.

“The disposal of Kier Living delivers another key milestone in the group’s strategy to simplify the business and strengthen its balance sheet.”

Kier publishes its interim financial results for the six months ended 31st December 2020 on April 21.