Kier Group, the London-listed construction company, is in talks about a deal that will complete the break-up of what was once one of Britain’s biggest outsourcers.

Sky News has learnt that Kier is in exclusive discussion to buy Tilbury Douglas, the construction arm of Interserve, which collapsed nearly three years ago.

If completed, a deal would cement Kier’s status as one of the government’s largest private sector contractors, spanning projects in hospitals, prisons and roads.

City insiders said on Monday evening that the deal would inevitably raise questions among Kier’s shareholders about the company’s strategy and balance sheet after it raised more than £500m in equity in two separate share sales in 2018 and 2021.

Those cash calls, which were allied to a broader financial restructuring of the business, were designed to shore up Kier’s balance sheet amid concerns that it could follow rivals such as Carillion and Interserve into oblivion.

Sources said the Cabinet Office had been notified of Kier’s intention to acquire Tilbury Douglas – a historically resonant name from the UK construction and engineering sectors.

The price being paid by Kier for the business was unclear, with Interserve’s remaining group pension scheme expected to be taken on as part of the transaction.

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The bulk of Interserve’s operations – its support services division – was taken over by rival Mitie, while last year the jewel in its crown, equipment services arm RMD Kwikform, was sold to France’s Altrad Group.

At its largest, Interserve employed more than 45,000 people in the UK.

Kier’s restructuring has seen its shares rebound, with a 65% surge over the last year giving it a market value of £475m – still a lower sum than the aggregate amount raised from shareholders in its two equity-raises.

It sold its housebuilding arm, since renamed Tilia, to the private equity firm founded by prominent financier Guy Hands.

Kier is now run by Andrew Davies, an experienced industry figure who had been due to take up the top job at Carillion shortly after it collapsed in January 2018, as its new chief executive.

Both Kier and Tilbury Douglas declined to comment.

The Cabinet Office has been contacted for comment.

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