ºÃÉ«ÏÈÉúTV

Morgan Sindall is in line to buy MJ Gleeson's £200m-turnover civil engineering business.

ºÃÉ«ÏÈÉúTV has learned that talks between the two firms are at an advanced stage, and they are on the verge of signing an exclusivity agreement.

If the deal goes ahead, it would mark a further fragmentation of the Gleeson Group, which sold its construction arm to a management team led by Martin Smout, the managing director of the building business, in August last year.

The civils business would complement Morgan Sindall's infrastructure services division, which provides civil engineering and utilities services to the water, gas electricity and transport sectors.

This is Morgan Sindall's weakest area: operating profit dropped by £1.8m to £6m in the year to 31 December.

Gleeson's civils operations deal with civil and process engineering. Its subsidiaries include Gleeson MCL, which does construction work for the rail sector, Powerminster, which undertakes M&E maintenance, and a concrete repairs business. It had work worth £600m order book on 1 October.

The sale would leave Gleeson with Gleeson Homes, its housing and regeneration arm, which has a turnover of £160m.

Growth by acquisition is the way when you have money in the bank

City source

Investment bank Close Brothers is advising Gleeson and undertaking a review of the whole business.

Gleeson has essentially been wearing a "for sale" sign since it made a £44m loss on its building division in the year to 30 June 2005 and rejected a £197m takeover approach from venture capitalist Castle Acquisitions last month.

Morgan Sindall, on the other hand, is in a strong position. Its share price, which has risen steadily in the past 12 months, rose 4% to 1146p on Wednesday when the firm revealed a 23% hike in pre-tax profit to £42m in the year to 31 December.

The rise in profit was driven by a strong performance in its affordable housing and fit-out division.

One City source said: "Acquisition is a way to achieve growth if the market is not there and you have money in the bank."

Close Brothers declined to comment on the deal and John Morgan, Morgan Sindall's chief executive, said that the company did not comment on market speculation.