BLACKSTONE, the US private equity group, has agreed to take a majority stake in the formerly family-controlled Miller Group, which has surrendered its independence as the price of refinancing its hefty bank borrowings.

The Edinburgh-based Miller Group has accepted a £160 million capital injection, the vast bulk of which came from Blackstone's GSO Capital Partners operation. It is believed a stake of between 50% and 55% will be bought.

The fundraising will result in a big reduction in the effective influence of members of the founding Miller family.

Led by the company's chief executive Keith Miller, family members controlled around 60% of the shares before the deal was struck. It looks likely the total stake held by family members will be reduced to around 30%, although the company declined to give details of the revised holding.

A chunk of the balance of the shares will be held by the three lenders who helped to bankroll rapid expansion of the group before the downturn in property markets took a toll on the business.

Lloyds Banking Group, Royal Bank of Scotland and National Australia Bank have agreed to extend the repayment of around £600m of borrowings for five years, to 2017.

All three declined to comment. However, a source said the lenders have taken big "haircuts" which will involve them writing off some of what was owed.

Lloyds Banking Group had a 20% stake in Miller Group which it acquired following the rescue takeover of the former Halifax Bank of Scotland. This is thought to have been diluted in the refinancing.

Royal Bank of Scotland is believed to have provided more funds.

The funding deal was agreed five months after Miller was first reported to be in talks with Blackstone. The private equity giant is believed to want to use Miller as a vehicle to consolidate the sector by acquiring struggling rivals.

Miller Group hired Greenhill to help find a strategic investor as the firm looked to cut £600m debts.

With a big housebuilding operation Miller enjoyed years of strong growth before the credit crunch led to tough times for builders.

The group made pre-tax losses totalling £130m in 2010 and 2009.

However, Keith Miller said: "This equips us with substantial extra muscle to take advantage of the many opportunities offered by the current economic cycle."

A source said Blackstone gave a vote of confidence to the management team, which will remain in place. The group will have headquarters in Edinburgh.

Transaction completion is subject to conditions, including regulatory consents.