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Britain’s largest housebuilder Barratt Developments has revealed a surprise all-share merger deal for smaller rival Redrow, in a move that values the latter at £2.5 billion.
A tie-up between Barratt, valued at £5.2 billion as at Monday’s close share price, and Redrow would create a building behemoth.
Last year the pair collectively generated revenue of £7.4 billion and completed on home sales of 22,642.
David Thomas, group chief executive of Barratt, said: “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.”
Under the terms of the combination, which is recommend by both boards and also has the support of Steve Morgan who has a stake in Redrow which he founded, each Redrow shareholder will get 1.44 new Barratt shares.
Following completion of a deal Redrow shareholders will hold approximately 32.8% of the combined group and Barratt Shareholders will have around 67.2%.
The update comes at a time when Barratt has pointed to signs of momentum improving after a tough 2023.
Housebuilders last year grappled with soaring mortgage costs and high interest rates knocking demand, while the closing of the Help to Buy scheme to new applicants in October 2022 made affordability harder for many first-time buyers.
Today Barratt’s 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.”More to follow
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