US firm closes in on taking control of Miller

MILLER Group, the Edinburgh-based construction company, is close to concluding talks that may see majority control pass to US private equity giant Blackstone.

It is understood that a consortium of three banks will write-down a share of Miller’s estimated £730 million of debt and take equity in order to restructure the balance sheet.

Blackstone, through its GSO Capital Partners subsidiary, is expected to invest substantial funds, which will support acquisitions of other housebuilders.

The talks, which first emerged in July, are said to be at a delicate stage but a deal is likely to be announced before the end of the year.

The Scotsman has learnt that the family shareholders may invest further undisclosed funds alongside GSO, which is expected to inject in the region of £160m into the business.

The Miller family holds more than 60 per cent of the company and a key issue in the negotiations is whether it should relinquish majority ownership.

Whatever the outcome, chief executive Keith Miller and other senior figures are expected to remain in post. One source said: “This is a vote of confidence by investors in the management.”

Royal Bank of Scotland, which is thought to hold £200m of the debt, would become a shareholder for the first time.

In 2008, Bank of Scotland took a 20 per cent stake in a debt and equity deal, the first time a non-family shareholder had appeared on the share register.

Peter Cummings, who was chief executive, Bank of Scotland Corporate, at the time, described it as a “landmark transaction”.Clydesdale Bank also holds some of the debt, while two other smaller banks have minor interests.

Under the terms of the new deal, it is likely that the banks will together hold between 10 per cent and 20 per cent of the company.

The downturn in both the banking and property sectors are said to have had a marked impact on the business.

Miller has been working with investment adviser Greenhill for some months to help find an investor for the group, ahead of refinancing its credit facilities next year.

The latest negotiations follow years of resolving the ownership structure of one of Scotland’s biggest and best-known companies, which is also the largest privately-owned construction business in the UK.

The company was plunged into a family dispute in 2007, when those representing 64 per cent of the share capital wanted to approach buyers for their shares.

Keith Miller was concerned that the move threatened control of the company. The dispute was settled in January 2008 and within months many of the rebels sold their shares to Bank of Scotland.

The company, chaired by Sir Brian Stewart, has been tipped to lead a consolidation of the sector.

After years of successively rising profits, it reduced the group loss before tax from £72.4m in 2009 to £58m last year.

Three of the four main divisions returned to profit and over the year the company delivered a positive cash contribution.