UK housebuilder Barratt said it had agreed an all-share takeover of rival Redrow valuing the latter at £2.5bn. Under the terms of the deal Redrow investors will receive 1.44 new Barratt shares for their own stock which would leave them with 32.8% of the combined group and Barratt shareholders with the remainder.
The terms also imply a premium of 27.2% to the closing price per Redrow Share of 600p on February 6.
Barratt said the takeover could realise pre-tax cost synergies of at least £90m on an annual run-rate basis by the end of the third year after completion, with around 90% delivered by the end of the second year, although there was no mention of projected job losses.
Both companies also released half-year results alongside the takeover announcement. Barratt slashed its dividend as pre-tax profits plunged 81% to £95.2m amid the surge in borrowing costs last year that hammered demand for homes. The interim dividend was cut by 57% to 4.4p a share.
Forward sales at the end of January fell to 8,760 homes from 10,854 a year earlier at a value of £2.26bn, down from £2.66bn in 2023.
Redrow told a similar tale, with profits more than halved to £84m from £198m a year ago. The dividend was halved to 5p a share.
“In recent weeks the housing market has shown signs of improvement, with increasing mortgage approvals and reduced mortgage rates with greater competition amongst lenders. This in turn has improved homebuyer confidence and raised the prospects of a return to a more stable sales market,” said chief executive Matthew Pratt.