Barratt swoops on Redrow in £2.5 billion agreed deal
Barratt Developments has unveiled a £2.5 billion agreed offer for rival house builder Redrow in a move that will slash costs and accelerate activity.
Directors of the newly combined company, to be known as Barratt Redrow, say the deal will produce “significant cost synergies” of about £90m a year by the end of the third year.
This will be achieved from procurement savings and a rationalisation of divisional and central functions which are expected to drive a combined lower cost base.
On the basis of the closing price per Barratt share of 530p last night the combination implies a £2.524bn value for Redrow and represents a premium of approximately 27.2%. to the closing price per Redrow share of 600p.
For each Redrow share, its shareholders will receive 1.44 Barratt shares. Immediately following completion, Barratt shareholders will own 67.2% of the combined group and Redrow shareholders 32.8%.
Caroline Silver, Barratt’s non-executive chair, will take the same role at the new company. Barratt’s chief executive, David Thomas, Mike Scott, chief financial officer, and Steven Boyes, chief operating officer and deputy ehief executive of Barratt, will retain the same roles in the combined group.
The board of directors will be a combination of the existing executive and non-executive directors of Barratt, with the addition of Matthew Pratt, currently group chief executive of Redrow, and Nicky Dulieu, currently senior independent director of Redrow, and Geeta Nanda, currently non-executive director of Redrow.
Barbara Richmond, group finance director of Redrow, has agreed to join the combined group to support the integration for a period of not less than 12 months to ensure continuity and with a view to realising the benefits of the combination for both sets of shareholders.
Any executive or non-executive directors of Redrow not appointed to the board of the combined group will step down from the Redrow board upon completion.
David Thomas, group chief executive of Barratt, described the deal as an “exciting opportunity to bring together two highly complementary companies.”
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.
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 deal was announced as Barratt today unveiled an 81% fall in half-year profits to the end of December from £501.5m to £95.2m. Home completions fell 28.5% from 8,626 to 6,171. The interim dividend is down from 10.2p to 4.4p per share.
Mr 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.”