The merger, which will be a reverse takeover by Mansell of its troubled competitor, will create one of the UK's biggest providers of social housing.
The companies said that council housing is set to boom following the Government's decision to allow local authorities to spend billions of pounds in capital receipts. David Beardsmore, the Mansell chief executive who will head the combined group, said the company would be "ideally placed" to capitalise on the growth in social housing.
Shares in Lovell were suspended at 12.5p yesterday pending completion of the deal. The enlarged company, with sales of pounds 409m and an estimated market value of more than pounds 80m, will be able to compete for council housing work throughout the UK, Mr Beardsmore said.
The chief executive, who is sitting on a paper profit of around pounds 1.6m for his 2 per cent stake, said the deal was an almost risk-free way of ending Mansell's 66 years as a private company. The current market turmoil was making it hard to persuade institutions to invest in companies coming to market. "If we had to float independently we would not have got a market capitalisation as big as the one we would get with Lovell."
Under the terms of the reverse takeover Mansell, a Surrey-based contractor specialising in refurbishment and maintenance, will have 78 per cent of the new entity. The company, which had sales of pounds 183m and profits of pounds 4.7m last year, is controlled by the descendants of the founding family. Venture capital group 3i has a 17 per cent stake.
Mr Beardsmore said there was "no indication" that existing shareholders would sell on completion. Sir John Wickerson, Mansell's chairman, takes the post in the new group. David Heppell, Lovell's chief executive, will become an executive director.
The deal is a lifeline for Lovell, which has been hit hard by the recent economic slowdown. Analysts said the company had suffered from a number of ill-judged property deals in the late 1980s which plunged it into debt. A new management team, led by Mr Heppell and backed by a Swedish investment fund, took over three years ago and refocused the group on its core construction business. Last year the company posted a pounds 1.54m loss, compared with a loss of pounds 11.7m in 1996.
Meanwhile, Taylor Woodrow, the construction and property group, yesterday posted a 32.5 per cent rise in interim pre-tax profits to pounds 48m on turnover of pounds 668m. Colin Parsons, the chief executive, said the recent sell-off in housebuilding shares had been overdone. "I think [the market] has overreacted, and we will see that as the results of other housebuilders start coming through."Reuse content