Consultant Mouchel today revealed that it is to sell its rail business to consultant Sinclair Knight Merz (SKM) for £3.4M cash.
The deal is expected to complete by the end of the month and the cash will go some way towards Mouchel paying down its debts.
In the last week the troubled consultant has installed a new chief executive and two new chairmen, all after former chief executive Richard Cuthbert quit amid an £8.6M accounting black hole. The firm remains close to breaching the covenants of its £170M bank loan and could face administration.
Mouchel chief executive Grant Rumbles said the sale was the “key step in our strategy to focus on Mouchel’s leading positions in core markets”.
Terms of the deal
SKM will pay £3.4M in cash to Mouchel at completion and Mouchel will retain net realisable assets (principally debtors and work-in-progress) of a further £2.5M.
SKM will aid in the collection of Mouchel Rail’s trade debtors and work-in-progress, and will receive a 5% administration fee on all work-in-progress collected.
Mouchel has also committed to fund certain work in respect of future project commitments under one contract up to a maximum of £750,000, and Mouchel expects that this will be recoverable upon completion of that contract.
The transaction is expected to complete on 31 October and is subject to certain conditions being satisfied relating to key employees and clients.
For the year ended 31 July 2010, Mouchel Rail reported a post-exceptional profit before tax of £800,000 on net revenue of £13.6M. At 31 January 2011, gross assets, subject to the disposal, were negligible.