Two of the country's largest housebuilders are set to become one thanks to a £2.5bn takeover deal struck by Barratt Developments to acquire Redrow.
The move, which both firms have said had the potential to increase the number of properties completed, creates a combined business of £7.4bn revenue and 22,642 homes in 2023. But it comes at a tough time for the housing market, with both companies issuing downbeat results showing big drops in revenues this morning.
The merger will realise cost savings of at least £90m by year three through procurement, a rationalisation of divisional and central functions. Barratt also indicated there will be job losses where there are duplicate roles - saying that subject to a review there could be a workforce reduction of about 10%, equating to about 890 jobs across the combined group.
The sale will net Redrow's founder Steve Morgan, who still owns 16% of the company, around £400m in shares in the combined housebuilding giant. It is not yet known how the merger will impact on Redrow's headquarters operation in Flintshire, North Wales.
The two companies say it will create a combined business capable of meeting current challenges in the housing market, with Redrow directors saying they believed in standalone prospects for the firm but recognised the benefits of scale.
Under the terms of the deal, which is subject to regulatory approval, Redrow shareholders will receive 1.44 Barratt shares for each Redrow Share. Barratt Redrow, as the company will be known, will market homes under the Barratt Homes, David Wilson Homes and Redrow brands.
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David Thomas, group chief executive of Barratt, said: "We have great respect for Redrow, its overall strategy, its leadership and employees and its high-quality homes and communities.
"This is an exciting opportunity to bring together two highly complementary companies, creating an exceptional homebuilder in terms of quality, service and sustainability, able to build more of the high-quality homes this country needs. The combined group would leverage the respective strengths of both Barratt and Redrow, delivering significant benefits to our people, our supply chains, and - most importantly - our customers."
Matthew Pratt, group chief executive of Redrow, said: "Redrow and Barratt combined creates a leading 海角视频 homebuilder. Together, we'll be in a much better position to offer a broader range of high-quality and energy-efficient homes to customers."
Redrow's founder Steve Morgan said: "During the 50 years since I founded Redrow, I could not be more proud of the unique reputation it has earned for building premium homes and thriving communities.
"Barratt is a home builder I have long admired due to their likeminded attention to quality. I am confident that the Barratt/Redrow combination, with their three high-quality complementary brands, will create a standout home builder for the future and accelerate the delivery of much needed homes across the 海角视频."
Both Barratt and Redrow have separately issued downbeat results today amid widespread challenges in the housebuilding market. Barratt posted half-year results for the six months to the end of December in which it revealed completions were down more than 28% to 6,171 homes and statutory pre-tax profits plummeted 81% to £95.2m.
Directors pointed to a challenging market caused by the spike in mortgage rates between May and July last year and affordability issues for potential buyers, as well as "moderate" but continuing rises in the cost of building and softening prices. January brought some signs of market improvement and Barratt says it now expects to deliver between 13,500 to 14,000 in this financial year, compared with 17,206 in 2023.
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Redrow, which specialises in the downsizer market, also detected some signs of recovery, saying increased mortgage approvals and reduced rates had boosted buyer confidence in recent weeks. Pre-tax profits fell more than 57% to £84m in the same period on the back of a 23.7% drop in completions to 1,894.
Group chief executive Matthew Pratt pointed to Redrow's order book of £800m going into the second half.
He said: "In recent weeks, the housing market has shown signs of improvement, with increasing mortgage approvals and reduced mortgage rates with greater competition amongst lenders. This in turn has improved homebuyer confidence and raised the prospects of a return to a more stable sales market."