Bovis yesterday confirmed it was in merger talks with Galliford Try and had rejected a bid from Redrow. However, Redrow this morning indicated it is holding out hope of a deal for Bovis.
While Redrow and Galliford Try shares have remained almost completely flat this morning, Bovis Homes’ price is up seven per cent to 884p.
What are the analysts making of it?
Charlie Campbell and Thomas Buisson at Liberum: Other offers?
Bovis may also be interesting to other entities. Construction groups may be interested in building up a UK housebuilding capability, and for example we note that Skanska (NR) did try to set up a UK housebuilder from scratch and subsequently left the market – this could be a way to generate scale quickly. The larger housing associations are also edging more into private development and may find this a way to get scale quickly. There are also a few mid-sized housebuilders with well capitalised backers.
Neil Wilson at ETX Capital: Hold out for better.
Bovis should hold out for a better premium. Joint brokers Deutsche Bank and Jefferies have price targets of 969p and 886p respectively. A successful bid might need to at least split the difference to satisfy the board. Although even that might not be enough – only in January Deutsche Bank was targeting 1066p for Bovis. Above £10 a share might be more appropriate.
Aynsley Lammin and Matthew Walker at Canaccord Genuity: Margins and returns a key issue.
The key issue for Bovis shareholders is how an independent Bovis could improve margins and returns compared to what could be delivered by one of the interested parties as part of a larger combination. Bovis has reiterated that it remains committed to improving its returns.