MILLER Group has effectively given Galliford Try £7 million to take over its construction business in a move which means uncertainty for hundreds of workers.

The deal sees Galliford agree to pay £16.57m but also get a £23m cash balance to go along with its purchase of Miller Construction.

Edinburgh based Miller Group, headed by Keith Miller, indicated the £23m was necessary working capital for the construction business. It further pointed out the subsidiary was being transferred with a nil net assets balance in spite of having gross assets of £232m at the end of 2013.

Galliford Try, which also operates as Morrison Construction in Scotland, stated an intention to make £7m of cost savings and a likelihood it will have to pay £4m of one-off restructuring costs.

The Ucatt construction workers union declined to comment on the possible implications of the restructuring.

Industry sources suggested large scale redundancies seem unlikely but conceded job losses are inevitable.

Miller Construction was said to have booked £409m of revenue in 2013 but made a loss of £4m.

It employs around 700 staff across the UK with its main head office functions in Edinburgh.

Miller Group said it planned to concentrate on its activities in housebuilding and commercial property.

Chairman Philip Bowman said: "The acquisition of Miller Construction by Galliford Try will provide it with a strong base from which to grow its competitive position and continue to serve its clients."

In recent months Miller Construction has picked up a £156m contract to build and maintain six schools in the north east of England, a £31.4m community campus in Alford, Aberdeenshire and a £30m school in Holywell, North Wales.

In Scotland Galliford Try was one of the consortium which won the contract for the Aberdeen Western Peripheral Route and it is also working on the second Forth crossing.

Previously the group has worked on the completion of the M74 motorway and the Airdrie to Bathgate rail link.

Morrison Construction employs around 1,200 people with Scottish bases in Inverness, Grangemouth and Edinburgh.

Galliford Try said the deal means it is targeting £1.5 billion of annual construction revenue by 2018.

Alongside that its order book has effectively doubled to £2.8bn.

During the 2013 financial year and subsequently, Miller Construction has restructured or exited a number of mainly loss-making contracts and is now anticipated to return to profitability in the current year.

Galliford Try Greg Fitzgerald, chief executive, said: "We are delighted to announce the acquisition of Miller Construction, achieved at a very good price and with no net cash consideration.

"The acquisition brings together two construction businesses with a strong strategic fit and accelerates our strategy of growth into an improving marketplace."

Panmure Gordon analyst Rachael Applegate said: "Whilst Miller was loss making in 2013, after exiting some contracts it should return to profit in 2014.

"With the benefit of synergies, Galliford Try believes that the acquisition should be earnings enhancing in its 2015 financial year.

"Whilst this is good news, we believe that the stock remains overvalued at present.

"We therefore have a sell recommendation for now."

Miller Group has been majority owned by private equity firm Blackstone, through its GSO Capital Partners arm, since 2011.

At that time Royal Bank of Scotland, Bank of Scotland and National Australia Bank swapped debt for equity in a major refinancing with Noble Grossart, Miller management and Miller family members also among the shareholders.

In March, while unveiling a 58 per cent hike in profits for 2013 to £10.8m, Keith Miller admitted a stock market flotation was one option the group was looking at.