Market report

Barratt Redrow deal sparks housebuilder buying

Construction, housebuilding
Housebuilders are deemed takeover targets (pic: Terry Murden)

Housebuilders were the focus of attention as Barratt Development’s £2.5 billion deal to buy its smaller rival Redrow prompted speculation of a wave of similar deals as builders seek to reduce costs and get back to growth.

Barratt and Redrow believe that coming together will give them more “resilience through the cycle” and that they can benefit from having three brands — Barratt Homes, David Wilson Homes and Redrow.

Analysts say the £90 million a year “synergies” could translate to between 800 and 900 job cuts.

Shareholders in Redrow were clear beneficiaries with the stock up 88.5p, or 14.8% to 688.5p, but interest quickly shifted to other potential targets with Crest Nicholson rising 9.25p to 218.25p, and Grainger up 5p to 266p. Persimmon is tipped as a possible buyer of Crest Nicholson which some analysts had seen as a more likely target for Barratt.

The deal coincides with a new report saying the housing market outlook has turned “modestly brighter”. The Royal Institution of Chartered Surveyors (Rics) said a net balance of 7% of property professionals reported new buyer inquiries increasing. It is the strongest demand seen since February 2022, Rics said.

However, professionals based in Scotland and the north-west of England cited a generally flat picture for house prices in recent months.

Rics senior economist, Tarrant Parsons, said: “The UK housing market has seen a continued improvement in buyer activity through the early part of the year, supported by the recent easing in mortgage interest rates.

“Although sales volumes through much of the year ahead are likely to remain relatively subdued compared to the longer-term average, the outlook has now turned modestly brighter on a consistent basis over the past few survey reports.”

There was little enthusiasm for the £200 million share buyback announced by Sainsbury’s, causing the shares to slip 16.75p to 259p. It dragged Tesco 10p lower to 280p.

The FTSE 100 failed to extend its recovery rally as retail and mining stocks pushed the index 52.26 points lower to 7,628.75. 

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