The firm will receive £3.4m in cash, while Mouchel will retain debtors and work in progress, worth an estimated £2.5m.
Under the complex deal, SKM will assist Mouchel in the collection of Mouchel Rail’s trade debtors and work-in-progress, and will receive 5% of all cash recovered as a fee.
Mouchel has also agreed to fund future project commitments on one contract worth up to £750,000, but said it expected this to be recovered when the contract completes.
Grant Rumbles, Chief Executive Officer of Mouchel, said: “The sale of Mouchel Rail is a key step in our strategy to focus on Mouchel’s leading positions in core markets. We wish the rail business and its employees every success for the future.”
Mouchel Rail is led and managed by Simon Collins, the Rail Business Unit Director, who will remain with Mouchel Rail under SKM’s ownership.
All proceeds from the sale will be used to repay a portion of Mouchel’s £87m debt. Mouchel is currently locked in talks with lenders to avoid a breach of banking covenants.
The firm’s lending banks expect a first £30m tranche of debt payments in March.
Last year Mouchel Rail reported a post-exceptional profit before tax of £0.8m on net revenue of £13.6m. At 31 January 2011, gross assets, subject to the disposal, were negligible.
The deal is the first decisive action from new chief executive Grant Rumbles, who was brought in two weeks ago after Mouchel released a profit warning, admitting accounting errors and over optimistic contract valuations would cost the firm £8.4m.
A spokeswoman for Mouchel said: “We have been planning to sell part of our rail business, much of our stake in Mouchel’s middle eastern joint venture and our energy business dealing with pipelines since the start of the year.
“Grant Rumbles has been brought in to run the business, not sell it off in pieces.”
Earlier this week stand-in chairmain David Sugden quit after three days in the job, following the resignation of chief executive Richard Cuthbert and chairman Bo Lerenius.
Accountants from KPMG are currently reviewing the company’s financial position on behalf of Mouchel’s banks.