‘Look at our £306m profit’ – Redrow turns up heat on Bovis

Flintshire-based housing developer Redrow has turned up the heat in its bid to merge with troubled rival Bovis with the announcement that it is on track for at least £306m profit before tax.

The results for the year ending June 30, are expected to show an increase of 22% compared with 2016.

Today’s announcement puts further pressure on investors in Surrey-headquartered Bovis, which last week rejected overtures from Redrow over a possible deal, choosing instead to continue negotiations with Galliford Try.

Bovis said Redrow’s offer was too low compared to the possible Galliford deal worth £2.5bn.

However, a fund manager and top shareholder of one of Bovis’ major investors at Royal London Asset Management at the weekend advised the South East company to restart a deal with Redrow, 40% owned by former Wolverhampton Wanderers owner Steve Morgan.

Richard Marwood’s advice was based on the fact that Redrow focuses solely on housebuilding while Galliford Try 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.”

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.