British homebuilder Bovis has rejected a bid approach from rival Galliford Try but remains in talks about a possible deal, the company said on Sunday, adding it had also rejected a proposal from another suitor, Redrow.
A tie up between Galliford and Bovis would see the country’s sixth- and eighth-biggest housebuilders combine in search of economies of scale in an industry which has reported rising profits in recent years and so far shown little vulnerability to Britain’s exit from the European Union.
Bovis, whose CEO quit in January following a profit warning, said in February it would slow construction this year and focus on improving the quality of its homes after complaints from some buyers.
“Discussions with Galliford Try are ongoing,” a Bovis statement said. It said an initial all-share offer had been rejected, alongside a share and cash bid from Redrow because neither reflected the underlying value of the firm.
Galliford confirmed it was in talks over a possible purchase, saying it had made an offer that would value the entire issued equity of Bovis at £1.19bn ($1.45bn), or 886 pence per share.
Bovis shares closed at 828 pence on Friday.
Galliford said a merger could “create a new major housebuilder with national scale and geographic coverage” as well as delivering synergies from combining the two firms’ “operational structures, sourcing and operating practices.”
Its offer proposed an equity split in the combined group of 52.25 per cent to Galliford shareholders and 47.75 per cent to Bovis shareholders.
Redrow said it had approached Bovis with a proposal worth a total of 814 pence per Bovis share, made up of cash, new Redrow shares and a dividend payment.
Bovis said it had terminated discussions with Redrow after the firm indicated it was not willing to improve its offer.
“The board also concluded that the Redrow proposal was not in the interests of Bovis shareholders as the cash element of the offer would require shareholders to crystallise value at the current Bovis valuation,” the Bovis statement said.
Redrow said it continued to believe a merger had benefits but there was no certainty a firm offer would be made.
Earlier this year, Bovis said it saw little logic in a merger with another rival, Berkeley, after a media report said an influential Bovis shareholder wrote to Berkeley asking it to consider such a step.
The last major consolidation in the market occurred nearly a decade ago when Taylor Woodrow and George Wimpey merged to form Taylor Wimpey, becoming Britain’s biggest housebuilder at the time.
Business picture of the day
The sector has been buoyed by a lack of new housing supply which has pushed up prices and spurred several government schemes designed to support home buying.
But Bovis has struggled to capitalise on these conditions, and in February announced it had set aside £7m pounds to improve customer service and address complaints about poor quality housing.