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Housebuilder Crest Nicholson has rejected a £667mn takeover offer from rival Bellway, marking a third major deal push in the UK housebuilding sector as it battles a downturn triggered by high interest rates.
FTSE 250 builder Bellway confirmed late on Thursday that it had made an all-share offer for the smaller group following a report by React News.
But despite a 19 per cent premium to its closing share price on Thursday, Crest Nicholson on Friday said the proposal “fundamentally undervalued Crest Nicholson and its future prospects”.
The move by Bellway follows Barratt’s successful bid for Redrow earlier this year, a £2.5bn deal that would consolidate its position as the UK’s largest housebuilder. L&G is also in the process of marketing Cala Homes, a private homebuilder.
Bellway said the deal would bring significant efficiencies and offer Crest Nicholson investors, who would receive shares in the combined group, “a reduced risk profile, lower indebtedness and an enhanced landbank”.
The update comes after Crest Nicholson reported it had sunk to a pre-tax loss in half-year results on Thursday and warned that profits would fall this year. The group has struggled, even in comparison with widespread gloom in the homebuilding sector, as buyers have been put off by high borrowing costs on their mortgages.
In January, it reported annual pre-tax profits had dropped 70 per cent and cut its profit forecasts, blaming higher costs at legacy building sites.
Investec analyst Aynsley Lammin said the company had “performed very poorly relative to the sector over the last 18 months”.
It also faces a legal claim from M&G over a fire that badly damaged a block of flats built by the housebuilder and owned by the UK asset management group.
Crest Nicholson said it “remains confident in its standalone prospects” under the leadership of new chief executive Martyn Clark, given its strong land portfolio and having completed a review of the costs linked to its older building sites with external consultants.
Bellway has until mid-July to make a further offer or withdraw from the pursuit.
The takeover battle comes as L&G is trying to sell Cala Homes. FTSE 100 group Persimmon is one of the potential buyers, according to a person familiar with the matter.
Barratt’s £2.5bn deal for upmarket housebuilder Redrow has faced scrutiny from the Competition and Markets Authority, which is probing the housebuilder sector — a hurdle that other deals in the industry could also face.
