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Barratt has reached a £2.5bn deal to buy rival Redrow, creating the UK’s largest housebuilder, as developers weather the property market downturn.
The boards of both FTSE housebuilders have recommended that all-share combination, which they said would combine complimentary brands and achieve significant cost savings.
The offer by Barratt, already one of the country’s largest developers, comes as both companies navigate a brutal downturn in new homes sales caused by higher mortgage rates squeezing prospective buyers.
Housebuilders across the country have cut costs and slowed land buying as their profit and output plummet. Wednesday’s deal marks the first move to consolidate by two big national developers since the market soured. Vistry struck a £1.25bn deal to buy Countryside in 2022.
Barratt chief executive David Thomas, who would lead the combined group, said the deal would “bring together two highly complementary companies, creating an exceptional homebuilder”.
The companies said the Redrow brand, which focuses on larger, high-quality homes for more affluent buyers, would continue as part of Barratt, which already operates the David Wilson Homes brand alongside Barratt Homes. Redrow chief executive Matthew Pratt will continue to lead the brand and join the board.
The combined group would be renamed Barratt Redrow plc and build roughly 22,000 homes a year, based on the two companies’ current performance.
Steve Morgan, founder of Redrow and still its largest shareholder with a 16 per cent stake, has agreed to support the deal. Morgan said he hoped the larger group will “accelerate the delivery of much needed homes across the UK”.
The terms of the deal, which still have to be approved by shareholders, offer a 27 per cent premium over Redrow’s Tuesday closing share price.
Barratt on Wednesday announced that its adjusted profit before tax dropped 70 per cent to £157mn and its output fell 28 per cent to 6,171 homes in the six months to the end of December. Redrow also reported a major slowdown in trading.