Barratt and Redrow have agreed a merger that will create a £7bn housebuilding giant.
The deal will see Barratt take over the entire share capital of its rival for £2.52bn, at a premium of approximately 27.2%.
Following completion, Redrow shareholders will hold around a third of the combined group, to be called Barratt Redrow, with Barratt shareholders holding the remaining two-thirds.
Barratt’s board believes the deal will result in pretax cost synergies of at least £90m against one-off costs of £73m. It expects to build 22,000 homes each year after the union.
The combined group will have aggregated net assets of just under £7.5bn and an aggregated net cash position of £874m, along with a development pipeline of 92,345 plots.
In a separate announcement today, Barratt revealed that pretax profit for the six months to the end of December had fallen by 80% from £501m to £95.2m.
Revenue was down by a third to £1.85bn, from £2.78bn for the six months to December 2022. Margin reduced from 17.8% to 5.3%.
Home completions dropped by 28.5% to 6,171.
Redrow’s half-year results, also published today, show a fall in revenue from £1bn for H1 2023 to £756m for H1 2024.
Margin was down from 19.3% to 11.4%, while profit dropped from £198m to £84m.
Home completions fell from 2,485 to 1,894.
Barratt group chief executive David Thomas 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.”
Redrow group chief executive Matthew Pratt added: “Redrow and Barratt combined creates a leading UK homebuilder. Together, we will be in a much better position to offer a broader range of high-quality and energy efficient homes to customers.”
Redrow founder Steve Morgan is supportive of the plans. His family’s investment vehicle, Bridgemere Securities, is Redrow’s largest shareholder, with around 16% of issued capital.
Morgan said: “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.”
Barratt personnel will dominate the new board. Barratt’s chair Caroline Silver will lead the combined group, while David Thomas will become group chief executive. Barratt chief financial officer Mike Scott will become CFO, with Barratt’s team also taking the COO and deputy chief executive roles.
Pratt will be given the role of group CEO, Redrow, and group executive director.
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