Bovis Homes confirms merger talks with Galliford Try after rejecting Redrow offer

 
William Turvill
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Bovis Homes said merger talks with Galliford Try are "ongoing" (Source: Bovis Homes)

Bovis Homes is in £2.5bn merger talks with fellow housebuilder Galliford Try after rejecting a bid from Redrow.

FTSE 250-listed Galliford Try said the tie-up would create “a new major housebuilder with national scale and geographic coverage through the combination of the sixth and eighth largest UK housebuilders by completions”.

Bovis, which is also on the FTSE 250, today said it had rejected a share and cash approach from Redrow and an all-share proposal from Galliford Try.

“The board of Bovis reviewed the proposals and concluded that neither reflected the underlying value of the Bovis business and therefore both should be rejected,” the company said.

Read more: Bovis Homes shares tumble after profits slump

Redrow, whose offer was also judged not to be in the best interests of shareholders because “the cash element of the offer would require shareholders to crystallise value at the current Bovis valuation”, then “indicated that it was not willing to improve the terms of its proposal and discussions were terminated”, Bovis said.

“Discussions with Galliford Try are ongoing,” the statement said.

“In the meantime, the board is making good progress with plans to recover and improve group profitability and enhance return on capital employed. The search for a new chief executive is also progressing well.”

Read more: Bovis shares have risen on hopes Berkeley will buy it

Bovis added: “This statement has been made without the consent of either Galliford Try or Redrow. There can be no certainty that any firm offer will be made or as to the terms on which any firm offer might be made.”

Bovis, which is currently led by Earl Sibley as interim chief executive, has been in the process of trying to find a buyer, one source told City A.M.

It has been a troubling couple of months for Bovis. Former chief executive David Ritchie stepped down from the company in January as the company said it expected volume delivery for 2016 to be lower than previously forecast.

Confirming the talks, Galliford Try revealed that it has proposed its shareholders would hold 52.25 per cent of the combined group, compared with Bovis investors’ 47.75 per cent. It said that, on the basis of its share price from Friday, this would value the entire issued equity of Bovis at £1.2bn, or 886p per share, a seven per cent premium on its last closing price, 813p.

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