Barratt and Redrow reveal £2.5bn megamerger
Housebuilding giant Barratt has revealed plans to merge counterpart Redrow in a deal worth £2.52bn.
The firms announced the proposed deal to the London Stock Exchange this morning (February 7) and will now ask shareholders to vote it through to create a group that turned over £7.5bn last year and have a land pipeline of over 92,000 plots.
The deal would be one of the biggest seen in the sector and would lead to the creation of the UK’s largest housebuilding company.
In a statement, the firms said: “The deal will realise significant cost synergies from procurement savings and a rationalisation of divisional and central functions which are expected to drive a combined lower cost base.” These cost savings are thought to be in the region of £90m a year.
David Thomas, group chief executive of Barratt, said: “We have great respect for Redrow, its overall strategy, its leadership and employees, and its high-quality homes and communities.
“This is an exciting opportunity to bring together two highly complementary companies, creating an exceptional homebuilder in terms of quality, service and sustainability, able to build more of the high-quality homes this country needs.
The combined group would leverage the respective strengths of both Barratt and Redrow, delivering significant benefits to our people, our supply chains, and – most importantly – our customers.”
Caroline Silver, Barratt’s non-executive chair, will lead the new company as non-executive chair. Barratt’s chief executive, David Thomas, will be group chief executive of the combined group. Mike Scott, chief financial officer of Barratt, will be chief financial officer of the Combined Group, and Steven Boyes, Chief Operating Officer and deputy chief executive of Barratt, will be chief operating officer and deputy chief executive of the new firm.
Matthew Pratt, group chief executive of Redrow, said: “Redrow and Barratt combined creates a leading UK homebuilder. Together, we’ll be in a much better position to offer a broader range of high-quality and energy efficient homes to customers.
“The Redrow brand, with its premium, characterful homes, has an excellent reputation and will remain a key part of the combined group. As with Barratt, Redrow’s fifty-year success story is based on its people, products and supply chain partners. Both businesses are a great fit and there are many exciting opportunities to innovate and share knowledge across a range of different areas.”
Steve Morgan, Redrow’s founder said: “During the 50 years since I founded Redrow, I could not be more proud of the unique reputation it has earned for building premium homes and thriving communities.
“Barratt is a home builder I have long admired due to their likeminded attention to quality. I am confident that the Barratt/Redrow combination with their three high-quality complementary brands, will create a standout home builder for the future and accelerate the delivery of much needed homes across the UK.”
The news comes on the back of huge drops in turnover and profit at Barratt, which was also announced the morning.
Revenue fell by over a third to £1.85bn for the half year to to end of 2023, while profit before tax fell by 81% to £95.2m on the back of costs associated to legacy properties.
Thomas said: “Despite the challenging macroeconomic backdrop, underlying demand for our homes is strong. Since the start of January, we have seen early signs of improvement in both reservation rates and buyer sentiment, helped by expectations of lower interest rates and the introduction of more competitive mortgage rates.
“I would like to thank everybody at Barratt, our sub-contractors and our suppliers for their commitment and hard work as we continue to deliver for our customers, stakeholders and shareholders.”
