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BUILDERS BACK ON THE TAKEOVER TRAIL

SCALING UP: Bellway's Watson is looking at a tie up with Redrow

Monday May 5,2008

By David Shand, Markets Editor

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BRITAIN’S beleaguered housebuilders are in the takeover mix again after Bellway approached its rival Redrow to form the country’s second-biggest builder in a £1.3billion merger.

Bellway, the UK’s fourth-biggest builder by market value, is understood to have made its move to No 6 player Redrow in the past month.

It is unclear how far talks progressed, but the move will be seen as an attempt to drive down costs as the industry reels from the impact of the credit crunch drying up mortgages.

Both Bellway, headed by chief executive John Watson, and Redrow, led by Neil Fitzsimmons, have seen their market values plummet about 60 per cent over the past year.

But a combination of the two would see them leapfrog Barratt and Taylor Wimpey into second place behind Persimmon.

Last year’s £5.5billion merger of Taylor Woodrow and Wimpey, and Barratt’s £2.2billion acquisition of Wilson Bowden, marked the high-water mark for consolidation in the sector. Crest Nicholson and McCarthy & Stone were taken private.
Redrow has frequently been touted as the likeliest target since then.

Speculation about possible corporate activity intensified when activist hedge fund Toscafund recently took its stake in the company to more than 16 per cent. One industry source said: “Across the industry everyone has talked to just about everybody else and maybe having greater scale is useful at the moment.

“But you could end up with just a larger company facing difficulties, particularly if you can’t gain much from synergies.”

The downturn in the housing market has culminated in sales reservations falling nearly two-thirds in the key spring selling season, while analysts said land values had fallen at least 40 per cent.

Last month Persimmon said it was putting off starting work on about 30 sites to conserve cash, while Barratt has been the subject of intense speculation that it will have to tap investors for cash through a rights issue.

Redrow refused to comment on merger speculation, while Bellway was unavailable for comment.

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