Barratt, the UK’s biggest homebuilder, said it has made a recommended all-share offer to buy Flintshire-based Redrow in a deal valuing its smaller rival at about £2.52 billion.
The combined firm, to be called “Barratt Redrow”, would aim to deliver more than 22,000 homes each year in the medium term.
Under the terms of the proposed deal, which is backed by the boards of both companies but is subject to shareholder approval, each Redrow shareholder would get 1.44 new Barratt shares for each share they hold.
Barratt said: “On the basis of the closing price per Barratt Share of 530 pence on 6 February 2024 … the terms of the combination imply a value for the entire issued and to be issued ordinary share capital of Redrow of approximately £2,524 million and represent a premium of approximately 27.2 per cent. to the closing price per Redrow Share of 600 pence on 6 February 2024 …
“Immediately following completion, Redrow shareholders will hold approximately 32.8 per cent. of the combined group and Barratt Shareholders will hold approximately 67.2 per cent. of the combined group …
“The board of Barratt believes that the combined group can be expected to achieve pre-tax cost synergies of at least £90 million on an annual run-rate basis by the end of the third year following completion, of which approximately 90 per cent. is expected to be delivered by the end of the second year following completion.
“The one-off costs of delivering these savings are expected to total approximately £73 million, with approximately 57 per cent. incurred in the first year following completion, approximately 32 per cent. expected to be incurred in the second year following completion and the remainder by the end of the third year following completion.
“The combination is expected to be accretive to Barratt and Redrow’s respective adjusted earnings per share in the first year after completion (excluding one-off costs of delivering synergies).”
Barratt CEO David Thomas would be group CEO of the combined firm. Barratt CFO Mike Scott would be CFO of the combined group, and Steven Boyes, chief operating officer and deputy chief executive of Barratt, would be chief operating officer and deputy chief executive of the combined group. Caroline Silver, Barratt’s non-executive chair, would be non-executive chair of the new firm.
Barratt CEO David Thomas said: “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 CEO Matthew Pratt said: “Redrow and Barratt combined creates a leading UK homebuilder.
“Together, we’ll be in a much better position to offer a broader range of high-quality and energy efficient homes to customers.
“The Redrow brand, with its premium, characterful homes, has an excellent reputation and will remain a key part of the combined group. As with Barratt, Redrow’s fifty-year success story is based on its people, products and supply chain partners.
“Both businesses are a great fit and there are many exciting opportunities to innovate and share knowledge across a range of different areas.”
Redrow founder Steve Morgan said: “During the 50 years since I founded Redrow, I could not be more proud of the unique reputation it has earned for building premium homes and thriving communities.
“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.”