The deal, which will catapult Interserve into the country’s top three FM players, was unveiled as the construction group reported headline profits had grown 8% over the year to £87m.

Interserve is funding the takeover of Initial Facilities with a £70m share placing, equivalent to around 10% of existing shares, and debt.

Adrian Ringrose, chief executive of Interserve, said: “We believe that this acquisition will deliver significant strategic progress in growing one of our core businesses and will make us a top three player by revenue in the UK facilities services market.

“The breadth and fit of the services we will now be able to offer, added to the advantages of increased scale and potential synergies, will create a compelling proposition, leaving us well placed for future growth.”

Initial Facilities employs 25,000 people across the UK, Ireland and Spain. Last year it turned over £542m, delivering a pre-tax profit of £8m, nearly half the level of the previous year.

Around 85% of Initial Facilities revenue is generated from the private sector, with the public sector representing the remaining 15%.

The business provides a full range of facilities services from mechanical and electrical building maintenance, energy management, cleaning, catering and security to fully integrated total facilities management.

Ringrose said the takeover deal would lead to a £10m integration cost but shared services would deliver annual savings of around £5m.

It will give Interserve a 5% market share in the fragmented £70bn FM market, creating big opportunities for further growth, he added.

Interserve’s shareholders will vote on the proposed takeover on 17 March.

Ringrose said that Interserve was well placed to build on the acquisition after the group reported headline profits up and revenue had increased by 12% to £2.19bn in 2013.

Interserve said it had secured £2.5bn of new business in the year, including work with the BBC, University of Sussex, HMRC, The Royal Navy, Ministry of Defence, DWP, Magnox, Jaguar Land Rover, the Lusail Tower in Qatar and the Emirates Engine Maintenance Centre in Dubai.

The construction division in the UK  raised revenue by 9% to £802m with operating profits steady at £14.7m.

Operating margins came under pressure slipping to 1.8%.

Ringrose said construction had diversified into new markets including energy from waste schemes.

The division is working on a £146m scheme in Glasgow, on behalf of Viridor and formed a joint-venture with Babcock & Wilcox Vølund this month to design and build an EfW plant for Viridor in Peterborough, UK, with a contract value of £15m.