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UK housebuilder Crest Nicholson has said it is “minded” to recommend a £720mn takeover offer from rival Bellway after its listed rival sweetened its bid.
The FTSE 250 group had rejected two earlier bids from Bellway as undervaluing the business, and also rebuffed a rival proposal from Avant Homes, the housebuilder controlled by the New York hedge fund Elliott.
On Wednesday, Crest Nicholson said Bellway had increased its bid to 273p a share — a premium of 28 per cent to the smaller group’s closing share price on June 13, the day before the talks were revealed, compared with a premium of 19 per cent for its previous offer. The revised offer values Crest Nicholson’s equity at £720mn, up from £667mn.
Crest Nicholson’s board said in a statement that “the revised proposal is at a value that it would be minded to recommend unanimously . . . shareholders”.
Accepting the bid would mean spurning a rival proposal from Avant, under which the smaller private housebuilder led by ex-Persimmon boss Jeff Fairburn would combine with Crest Nicholson to form a larger listed group.
In July, Crest Nicholson said it was “not currently minded to engage in discussions regarding a potential transaction with Avant while in an offer period in relation to a possible all-share offer from Bellway”. It rejected Bellway’s two previous offers in May.
Bellway now has until early August to make a concrete offer. A person close to the process said there was no certainty that the deal would go ahead.
The two-way contest for Crest Nicholson comes at a time of consolidation in the housebuilding sector driven by a prolonged downturn in home sales caused by high mortgage rates that has hit developers.
Barratt made a successful bid for Redrow this year, in a £2.5bn deal that would consolidate its position as the UK’s largest housebuilder, and Legal & General is in the process of selling Cala Homes.
Crest Nicholson shares rose about 4 per cent by mid-morning trading on Wednesday, while Bellway’s dipped 0.5 per cent — with the FTSE 250 index up about 0.7 per cent. Both housebuilders’ shares rallied last week on optimism that Labour’s election victory would trigger a boost in homebuilding.
Crest Nicholson had been seen as a takeover target following a series of profit warnings and unexpected costs from issues at its older building sites. Its former chief executive Peter Truscott attempted a turnaround effort, but retired in mid-June to be replaced by ex-Persimmon chief commercial officer Martyn Clark.
Anthony Codling, analyst at RBC, said the deal looked good for Bellway since it would get Crest Nicholson’s land bank for less than “book value”, meaning “the land is being purchased for a price lower than Crest paid for it”.
However, he said: “The big question is has Crest got to the bottom of these [legacy] issues, or will they bite again?”
Avant declined to immediately comment on whether it would stay in the ring.
Its proposal to combine the companies on the basis of their net asset value would have left Elliott as the largest shareholder, owning 30 per cent of the combined group. The proposal implies a higher value for Crest Nicholson but on very different terms — with Avant rolling itself into the listed Crest group.
