Laing said that the group had struck a deal with O'Rourke that will give the concrete specialist £30m in Laing assets, including property and company cars.
On top of the loss on the sale, Laing stunned the City by announcing that it had suffered a £40m shortfall on its construction arm this year. The division is now expected to be £53m in the red at the end of the year.
This figure includes £10m lost on the No 1 Poultry arbitration, and future money needed for the completion of the £300m National Physical Laboratory.
The sale is expected to be finalised in September, nearly a year after Laing announced that the £1bn-turnover division was for sale.
A Laing source said: "O'Rourke is not paying us anything. But our risk is over. We will retain risk for the National Physical Laboratory in west London, while it takes assets of £30m.
"The group accepts the offer is finally negotiated. It enables us to get on with the strategy of concentrating on our homes and property investment."
Laing confirmed last week that it was calling in US troubleshooter Bechtel to help it complete the National Physical Laboratory. It will also advertise for a team of up to 10 construction professionals to work on the laboratory and to support its PFI investment division.
O'Rourke was initially expected to pay up to £50m for the division, but this figure fell sharply during the due diligence process. Laing sources said that losses were worse than first expected. Smaller losses, in the region of £500,000, had accrued on other Laing construction projects.
Laing will leave about £70m in cash for O'Rourke to pay off creditors.
There was amazement in the City when the loss-making deal was announced. One analyst described the negotiations as the worst-handled he had ever witnessed.
Another said: "It demonstrates an incompetent approach to the whole thing. It is amazingly bad. Laing will have to work very hard to win back credibility in the City."
The analyst raised concerns that Laing's losses would reflect on the rest of construction. He said: "People will think the sector is accident-prone. It is hurting other companies." Laing's shares slid 4% to 429.5p following the declaration.
The completion of the deal ends a torrid four years for Laing, whose construction division losses between 1998 and 2001 now look likely to exceed £170m.
Details of the sale come in the same week that Laing chief executive Brian May left the group.
May, who joined the company last May, is expected to receive a pay-off of up to three years' salary.
Ray O'Rourke, owner of O'Rourke, was made managing director of the division at a Laing Construction board meeting on Tuesday.
Laing insiders claim May's departure will intensify the plunging morale in the division.
One insider said: "The staff are wary of what's going to happen. May has been the man who keeps reassuring them that everything is going to be okay, and now he's gone."
Laing is expected to demerge its housing division next year.
Fall from grace: the demise of a blue-chip contractor
September 1998 Tells City losses will be more than £20m as first problems emerge on the Millennium Stadium project in CardiffSeptember 1999 Confirms stadium will cost group £31m
October 1999 Shocks the industry by quitting competitive tendering
March 2000 Appoints Brian May as chief executive of construction but in two months later the division loses its third senior member when new business director Tony Aitkenhead quits, following chairman Paul Whitmore and southern director Martin Tidd
November 2000 Shocks the industry again by putting construction arm up for sale
April 2001 Announces subcontractor O’Rourke as preferred bidder. In May, takes a £10m hit on the No 1 Poultry development in the City
July 2001 Calls in Bechtel to sort out National Physical Laboratory contract, the final sticking point on the sale to O’Rourke. Expects construction losses to be £53m. Tells City deal will be sealed soon
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