07 February 2024
If you are covering the news that housebuilder Barratt is to buy rival Redrow, please see the following comment from Oli Creasey, property fund research analyst at Quilter Cheviot:
"Barratt Developments have made an offer to buy fellow housebuilder Redrow in an all-share deal. Redrow shareholders will get 1.44 Barratt shares for each Redrow share – a +27% premium to yesterday’s close price.
"By some measures, Barratt is already the largest public housebuilder in the UK. It isn’t the most valuable company by market cap, but the volume of houses built in the past year is ahead of any of its peers. So we wouldn’t categorise this transaction as a need to build scale. However, there is likely to be a some element of cost synergies to be harvested as a result of combining two companies in the same industry, and a limited amount of geographical overlap.
"Looking at share prices, the deal is an attractive one for Redrow shareholders, who get a boost to the undisturbed share price, and become holders in a much larger business. It is less clear what the advantage is for Barratt, although given the structure of the deal, there’s limited downside – the all-share deal means that no cash needs to change hands, and the balance sheet strength is unchanged. It should also be noted that at a price equal to 1.2x Redrow’s NAV, it isn’t a particularly expensive price being paid, and will create the undisputed largest public housebuilder in the UK."
