Stobart Group Limited (LON:STOB) said its wholly-owned subsidiary Stobart Holdings has divested Stobart Rail, owner of the group’s Rail & Civils division, to Bavaria Industries Group.

The aviation and energy infrastructure group said the initial cash consideration for the sale was £1,000, but it may receive additional consideration of up to £2.9mln based on the outcome of a single legacy contract. The business has 188 employees.

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Stobart had previously said it wanted to exit the Rail & Civils division by the end of the current financial year following continued losses within the business.

The disposal agreement is on a debt-free basis including the waiver of intercompany balances involving Stobart Rail and includes the transfer of specialist plant and equipment in addition to a three-month Transitional Service Agreement for certain back-office services.

“In June we set out our strategy which will see the group focus its investment on our aviation assets, particularly London Southend Airport,” Stobart chief executive Warwick Brady said in a statement.

“The sale of the Rail & Civils business removes the obligation for the group to fund the expected ongoing losses of the rail business and is a first step in achieving our goal of focusing our investment on aviation,” he added.

As of February 29, 2020, Stobart Rail had gross assets of £32.8mln, net liabilities of £11.8mln and posted a full-year loss before tax of £10.1mln.

The firm said the transaction will result in an estimated loss on disposal of £9mln after costs, before any additional consideration that may be received.