London (Parliament Politics Magazine) – The UK housebuilder Bellway has withdrawn from a £720m takeover offer for its smaller rival Crest Nicholson after months of talks.
Why Did Bellway Withdraw from the Crest Nicholson Bid?
Bellway stated it “does not intend to make a strong offer for Crest Nicholson”, without giving any explanations. It declared: “Bellway remains confident that its robust equilibrium sheet and operational strength, mixed with the depth and quality of its land bank, will enable Bellway to deliver volume growth in the years ahead and support ongoing value creation for shareholders.”
How Has Crest Nicholson’s Share Price Been Affected?
Both companies are recorded on the FTSE 250, where Bellway shares increased by almost 6% but Crest shares plunged by as much as 17% and later sold 14% lower at 224.17p. Bellway’s latest all-share proposal, in July, suggested a value of 273p a share. Crest stated on 10 July it was “minded” to receive Bellway’s improved all-share bid of £720m, after abandoning two earlier approaches in April and May as too low, the latter appreciating the business at £650m. Crest also overlooked a rival proposal from Avant Homes, the housebuilder owned by the New York hedge fund Elliott.
Last Thursday, Bellway and Crest opened the deadline for negotiations to 20 August, stating that they needed more time, while “good headway has been made on reciprocal due diligence with many features satisfactorily completed by both parties”.
How Did Crest Nicholson Respond to Bellway’s Withdrawal?
Crest stated that it had employed Bellway in response to a string of unsolicited proposals from the company, but it remained “confident in its standalone prospects”. It stated it had reviewed provisions for finished development sites supported by exterior consultants, under the new leadership of Martyn Clark.
Unlike Bellway and other housebuilders which have profited from a pickup in demand amid lower mortgage rates, Crest reported failures in the first half and slashed its dividend in its latest profit warning in June.
Bellway stated last week that it had surpassed its housebuilding targets for the past year, while Persimmon submitted its housebuilding forecasts for this year, saying it had been inspired by the new Labour government’s planning reforms and enhanced consumer confidence after the recent Bank of England rate cut.
Two other housebuilders, Barratt – which is the UK’s largest– and Redrow are due to connect in a £2.5bn deal. The UK competition regulator stated last week that it had discovered one area where it had troubles, around one Barratt development in Whitchurch and nearby towns, and asked the two companies to submit recommendations to address these.