Major investor urges Bovis merger with Redrow

Troubled housebuilder Bovis has been urged by a major investor to abandon merger talks with Galliford Try and instead join forces with Flintshire-based Redrow.

FTSE 250-listed Bovis last week rejected move with Redrow – 40% controlled by founder and former Wolverhampton Wanderers owner Steve Morgan – saying it was in discussions with Galliford over a £2.5bn link up.

It said Redrow’s cash and shares offer had been too low.

However, Richard Marwood, a fund manager at Royal London Asset management and a top shareholder at Bovis, said in the Sunday Telegraph he would prefer Bovis to deal with Redrow, on the grounds that the North West-based company focuses solely on house building while Galliford has a construction arm which builds everything from gas plants to railway stations.

“It would be potentially neater to do it with Redrow because it’s a pure housebuilder,” Marwood said.
“It looks a cleaner deal. Obviously the level of the Redrow offer was less attractive than the Galliford offer so it would need to be increased.”

Redrow’s valued Bovis at 814p-a-share, while Galliford’s all-share merger valued it at 886p. Bovis shares closed at 914p on Friday evening.

Royal London holds a 3.5% stake in Bovis. The housebuilder’s shares have plunged in recent months after a profit warning in December, which triggered the departure of chief executive David Ritchie less than a fortnight later.

Marwood continued: “You’re building houses, you’re not building spaceships. It shouldn’t be that difficult to fix. Bovis probably could sort things themselves, but they would need to get a new chief executive on board and the turnaround might take longer to realise value for shareholders than a bid.”

Galliford and Redrow have until April 9 to make a firm offer or walk away, under Takeover Panel rules.