Amey has struck a deal with Birmingham city council that allows it to walk away from a troubled £2.7bn roads contract, drawing to a close a bitter and long-running dispute that had stalled a sale of the UK outsourcing business by its owner Ferrovial.
The settlement, which had been the subject of a five-year legal battle, will allow Ferrovial to sell Amey as part of a package along with the rest of the company’s global support services business to prospective buyers, according to people familiar with the situation.
It also averts the risk of a Carillion-style collapse for Amey, after Ferrovial wrote off €774m (£670m) on the company in February and refused to provide a guarantee for the business.
Ferrovial, which is listed on the Madrid stock exchange, has put its entire support services business up for sale as part of an effort to narrow its focus to transport infrastructure, including its profitable toll roads business in North America. Potential acquirers include private equity firms such as PAI Partners, KKR, Blackstone and Advent.
Its UK division Amey, which provides construction and other support services, is the most troublesome part of that business and until this weekend’s agreement was expected to be sold separately.
Amey is one of the biggest outsourcers in the UK. It employs about 19,000 people in the UK, providing services from maintenance for the Ministry of Defence, transport for prisoners for the Ministry of Justice, to road and water pipe maintenance and private finance initiative projects for schools.
The relationship between the contractor and Birmingham council had become increasingly acrimonious and earlier this month it emerged that Amey had been fined £48.5m by the council because of delays repairing four bollards.
In a statement on Sunday, Amey said it had agreed to pay £215m in cash to extricate itself early from the private finance initiative deal, which required it to maintain 2,500km roads and bridges in Birmingham ahead of the 2022 Commonwealth Games.
Roughly £160m will be paid in 2019 and the remaining £55m over the next six years, while Amey will continue to provide services on an interim basis until September 30 this year.
Lenders to the Birmingham roads special purpose entity are being advised by EY, while Lazard is advising Amey. Birmingham council is being advised by Duff & Phelps.
Ferrovial declined to comment.
