The firm has signed a conditional share purchase agreement to acquire the entire issued share capital of Interserve FM for £120m in cash and a 23.4% shareholding in Mitie to be held by or on behalf of Interserve’s shareholders. Mitie plans to part-fund the deal through a £201m rights issue.

The new organisation will be evenly balanced between the public and private sectors and will be the largest facilities management company in the UK, employing over 77,500 people.

Completion of the transaction is subject to certain conditions, including approval from Mitie’s shareholders, and is expected to complete by the end of this year. Mitie will also be engaging with the Competition and Markets Authority as part of the process.

Phil Bentley, Mitie group chief executive, said: “We are pleased to have signed a sale and purchase agreement to acquire Interserve’s Facilities Management. 

“This will be a transformative acquisition, expanding the scale and footprint of our business to create the UK’s largest facilities management company and accelerate the delivery of Mitie’s long-term technology-led, vision.

“The transaction will better balance our public and private sector divisions; driving greater returns from the investments we have made in technology and customer service over the past three years.”

Interserve collapsed into administration in March 2019 and was bought by creditors in a pre-pack arrangement.

Following completion of the transaction, Interserve said it will continue to focus on delivering its business plans for its three remaining divisions, Construction, Interserve Construction Limited and Equipment Services (RMD Kwikform) and Citizen Services.

Alan Lovell will continue to lead Interserve Group as chairman, supported by Mark Morris, executive director and chief financial officer.

Mr Lovell added: “The proposed combination of Interserve Facilities Management with Mitie will create the UK’s leading facilities management company, with strong prospects in both the public and private sectors providing significant opportunities to employees, customers, and shareholders alike.

“The transaction, which is consistent with our stated strategy of realising value for our shareholders, will reduce the Group’s debts, enable a paydown to our shareholders and stabilise the Group’s financial position through a retention of a proportion of the proceeds.

“It will leave Interserve as a focused Group executing clear business plans in Interserve Construction Limited and RMD Kwikform, as well as our Citizen Services portfolio of businesses. Interserve Group Limited see significant opportunities for these businesses in their respective markets, which we will continue to pursue with a high level of discipline.”