Mitie Group has announced a deal to sell its catering business to royal warrant holder CH&Co for as much as £85 million, in a move which will narrow the outsourcer’s focus amid intense scrutiny on the industry.
The disposal includes the Gather & Gather and Creativevents brands across the UK.
It will fetch an initial £73 million in cash upon completion, as well as a deferred £12 million over the next four years if certain performance targets are met.
Buyer CH&Co holds a royal warrant for its services, with clients including the Historic Royal Palaces, ZSL London Zoo, and Kew Gardens.
As part of the deal, the companies will enter into a partnership which ensures Gather & Gather remains exclusive to Mitie’s clients, with CH&Co providing the service as a preferred partner.
CH&Co boss Bill Toner said: “We are very excited about the future growth potential for our business in our strategic partnership with Mitie – we bring scale and catering expertise, Mitie brings an extensive client list and innovation, we both share a reputation for great customer service.”
Mitie Catering managing director Allister Richards will transfer to CH&Co along with all other staff of the business.
Phil Bentley, chief executive of Mitie, said: “Mitie’s strategy is to invest in our core technology-led facilities management services – such as Security, Cleaning and Engineering Services – where we have a leading market position.
“Gather & Gather is a niche player in the £4 billion UK contract catering market. By teaming up with CH&Co at this time, we believe this ensures the best choice and competitive pricing for our clients, whilst releasing funds for reinvestment and strengthening our balance sheet.”
The decision comes amid Mitie’s wider efforts to simplify its business, including outsourcing and automating some back office functions, merging its London offices into one, and investing to increase its technology capabilities.
It has also offloaded its social housing business to Mears Group and its pest control division to Rentokil.
Mitie’s turnaround plan was launched after a string of profit warnings and amid a torrid time for outsourcing firms, with the collapse of Carillion and recent woes at Interserve dealing a reputational blow to the sector.