£2.5bn housebuilder mega-merger on track to be completed this week
Barratt’s £2.5bn takeover of Redrow Homes could be completed imminently after the companies announced this morning (August 19) that they hope to resolve these issues by the end of the week.
It found no major competition issues across the UK but did express concerns around a Barratt development in Whitchurch, Shropshire, which includes nearby towns such as Nantwich, Ellesmere and Market Drayton.
Both housebuilders currently have a high combined share of land in the catchment area around the Barratt development at Tilstock Road, with the addition of Redrow’s development at Kingsbourne in Nantwich. If the deal goes ahead, the CMA found that it could lead to higher prices and lower quality homes for homebuyers in this catchment area.
Barratt and Redrow said in an update to the London Stock Exchange that the merger has raised competition concerns in “only one of the more than 400 local areas where the two companies overlap.”
Barratt and Redrow are working with the CMA to resolve these concerns and avoid a more in-depth investigation.
Approval from the CMA was a condition for the merger, but Barratt has now waived this requirement and hopes the merger will proceed later this week as planned.
Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “Barratt’s acquisition of Redrow is expected to clear within the week, creating a new leader in the UK housebuilding space.
“The issues raised by the competition authorities always looked surmountable given they were restricted to just one part of Whitchurch in Shropshire and Barratt has waived the CMA clearance condition which had been written into the deal. An enforcement order from the regulator is likely but Barratt and Redrow are ready for it and will presumably do what’s necessary to prevent the probe going any further.”
He added: “The all-share deal should allow Barratt to replenish its landbank – a necessary precondition to ramping up volumes – with prices in the open market not having retrenched as much as might be expected in the current cycle.
“Barratt will hope its timing is good as the industry looks to pick itself off the floor following a difficult few years marred by a weak property market and rising interest rates. Management will be buoyed by figures from Rightmove showing a big increase in enquiries on homes for sale since the Bank of England cut rates at the beginning of this month.
“Speculation could now build over whether either of Barratt’s main rivals – Taylor Wimpey and Persimmon – might pursue their own deal in response.”
