Galliford Try is to restructure its construction business in the wake of the £42m takeover of Morrison Construction.

Galliford's construction business will be split between building and infrastructure. Andy Sturgess, head of Galliford's construction business, will lead the building division and Ken Gillespie, Morrison's managing director of construction services, will head infrastructure. Gillespie will also sit on Galliford's main board.

Sturgess said the two divisions would together have a turnover of £950m, £550m from building and £400m from infrastructure. "It would be too much for one person to manage," said Sturgess.

The purchase of Morrison Construction from parent Anglia Water Group is due to be completed at the end of this month.

Galliford Try and Morrison Construction are a good fit because they operate in the same markets but in different locations and for different clients. They have two clients in common - the British Waterways Board and Scottish Water.

The takeover will give Galliford, which also has a housing division, a bigger portfolio of PFI work and better access to the Scottish market.

Morrison's clients include the Highways Agency, HM Prison Service, Thames Water, National Grid and the Scottish Executive.

Galliford is expecting to make cost savings of £2m a year after the takeover, but Sturgess said that although the number of redundancies among the 1400 Morrison staff had not been decided upon, it would not be large.

Galliford proposes to raise £50m to finance the deal by issuing 46.8 million extra shares at 107p each. As part of the terms of the deal AWG has agreed to take a £55m hit, mainly to take care of Morrison's pension deficit.

It is Galliford's second big acquisition of the year so far. In January it bought Lincolnshire housebuilder Chartdale for £67m.

"Clearly we won't be looking at acquisitions over the next 12 months," Sturgess said.

Sturgess said that Galliford had identified Morrison as a takeover target 18 months ago but said that negotiations did not become serious until November. Exclusivity was reached in January.

Jonson Cox, AWG chief executive, said the deal was "a very good result for all parties". AWG bought the Morrison Group for £262m in 2000.

What Morrison adds

  • Combined £950m anticipated turnover
  • Infrastructure division run by Ken Gillespie (left) – £400m turnover; building run by Andy Sturgess (right) – £550 m turnover
  • £1.2bn order book n 1500 staff
  • Clients include Highways Agency, HM Prison Service, Scottish Executive, National Grid
  • Morrison PFI business based in Edinburgh
  • Projects include 148-unit accommodation project for Defence Housing Executive in Portsmouth, and design, construction and finance of 11 schools for the Highland Council (50% equity stake)
  • £2m of annual cost savings for Galliford Try