The takeover will create the UK’s largest FM business, employing 77,500 staff in both hard and soft FM services.

Under the deal agreed by both company boards, Interserve will receive £120m in cash and a 23.4% shareholding in Mitie.

The proposed take-over needs to be ratified by Mitie’s shareholders and is expected to complete by the end of this year.

Last year Interserve Facilities Management achieved revenue of £1.4bn, generating operating profits of £43m.

Mitie, which presently employs 37,500 staff, this morning posted operating profits of £86m from £2.2bn turnover in the year to March.

Following the completion of the transaction, Interserve Group will continue to focus on delivering its business plans for its three remaining divisions: Interserve Construction, RMD Kwikform, as well as its Citizen Services portfolio of businesses.

Also Mitie this morning announced plans for a £200m right issue and extension of a £250m banking facility until the end of 2022 to put it on a stable financial footing.

Around £80m will be used to part-fund the Interserve acquisition.

Alan Lovell will continue to lead Interserve Group as chairman, supported by Mark Morris, chief financial officer.

Phil Bentley, Mitie group chief executive, said:  “We are pleased to have signed a sale and purchase agreement to acquire Interserve’s Facilities Management. 

“This will be a transformative acquisition, expanding the scale and footprint of our business to create the UK’s largest facilities management company and accelerate the delivery of Mitie’s long-term technology-led, vision.”

“The transaction will better balance our public and private sector divisions; driving greater returns from the investments we have made in technology and customer service over the past three years.”