More details of construction arm sale emerge, including initial payment of about £27m.
O'Rourke will become preferred partner for Laing's PFI work if it buys the construction arm. Speaking at last week's results meeting, outgoing construction chairman Jim Armstrong said O'Rourke would have first refusal once the deal was signed.

This understanding over PFI contracts is one of a number of details to emerge about the sale. Others include a phased payment for the business – said to be in the region of £50m.

Neither side is prepared to talk figures until O'Rourke has completed due diligence, but it is understood that once that hurdle is cleared, the sale could go ahead with an initial deposit of just over £27m, with the remainder coming from a share of the construction division's profit over the next three years.

Laing is also expected to leave about £70m in the £1bn-a-year construction arm to pay creditors when the deal is concluded early next month. Sources said: "This will comfortably cover outstanding creditors and any remaining difficulties in contracts."

Armstrong said the proposal to link a sale with PFI contracts had always been on the cards. He said: "Right back in the first information memo in November, we held out the offer to interested parties that we would negotiate with them on PFI deals. Our investments operation needs a construction partner and a construction business needs PFI activity."

He said this would differentiate Laing from other PFI investors such as banks: "Our investments division has access to construction expertise. That still makes investments a better player in the PFI field than other parties."

Armstrong added that the PFI tie-up would make the deal easier to complete. He said: "O'Rourke is not just screwing us down. There is a long-term relationship here."

Laing's results, announced on Wednesday, show clearly why it is disposing of its construction arm. The division lost £88.9m in the year to 31 December 2000, including a £40m write-off for loss-making contracts. Overall, the group turned in a pre-tax profit of £5.7m, including £86.7m profit from its core activities of housing, property and investments.

On the question of staff morale in the wake of the takeover bid, Armstrong claimed that the mood had improved since O'Rourke was named preferred bidder.

Armstrong said: "Staff turnover has reduced. There are no problems at the moment. There is no doubt we came through a difficult time in December to February."

But he admitted that the future of construction chief executive Brian May was still up in the air. He said: "It's up to Ray; it's not really for me to comment. The relationship is good between Brian and Ray. There isn't a stand-off – they are working together through this due diligence period. There is a deal there to be done."

O’Rourke is not screwing us down. There is a long-term relationship

Jim Armstrong, chairman, Laing

It is understood that O'Rourke is still trying to persuade May to stay on and that there will be no direct role for O'Rourke group managing director David Anderson.

O'Rourke continues to maintain that he will not make any redundancies among the division's 1500 staff. It is understood that he believes that a period of consolidation is vital.

Although there is no financial incentive for Laing staff to stay once the deal goes through, observers say the opportunity to earn more money working for a profitable firm will be an incentive to many. "The O'Rourke culture is one of 'you perform, we reward'," said one observer.

Laing put the 150-year-old company up for sale last November, having made the decision to get out of contracting in September. After the £20m loss at Cardiff Millennium Stadium, shareholders decided that the firm did not have the money to become a larger player in construction. It wanted to protect its balance to be able to invest in PFI, housing and property.

The decision to accept the O'Rourke bid was based in large part on its pledge to keep all the staff – neither of the other shortlisted bidders, understood to be Multiplex and Bouygues, were prepared to give such a commitment.

Laing was surprised by O'Rourke's interest. "We did expect the firm to go to a multinational looking to increase its presence in the UK," said one company source. "But we were immediately impressed by just how passionate Ray O'Rourke is about construction and just how determined he was to do the deal."

However, O'Rourke is not in it for sentimental reasons and insiders say he believes that he can make money from the company. Laing maintains that with its latest write-offs, all the skeletons are now out of the cupboard and the remaining contracts are profitable.

O'Rourke is visiting all of Laing's sites and studying the contracts as part of the due diligence process. Both sides maintain that the negotiations have been conducted with total openness, and so far nothing has been unearthed to derail the sale.

"Staff and clients seem to be persuaded by it. It just comes down to price now," said one source.

"We are obviously negotiating with O'Rourke exclusively, but the other bidders have said come back to us if the opportunity arises.

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