Barratt Developments, a leading UK housebuilder, has acquired Redrow, another prominent player in the industry, for £2.5 billion. This strategic move is expected to propel Barratt to the forefront as the nation's largest housebuilder.
The merger, subject to shareholder approval, brings together the capabilities of both entities, allowing them to construct approximately 23,000 homes across the UK. The combined entity is projected to generate a turnover of £7.5 billion, based on last year's figures.
The deal is seen as a means to enhance resilience in the face of market challenges, such as increased mortgage rates that have dampened home sales in recent months. The combined entity aims to leverage synergies and cost savings, potentially reducing annual costs by £90 million within three years of integration.
The amalgamation brings under one roof three distinct brands: Barratt Homes, David Wilson Homes, and Redrow. Redrow, in particular, specializes in premium housing, particularly larger family residences. Barratt aims to strategically integrate premium offerings into selected sites, while expanding opportunities for Barratt or David Wilson Homes within Redrow's portfolio.
The transaction values Redrow at approximately £2.5 billion, representing a 27% premium over its recent stock market valuation. Redrow shareholders will receive 1.44 new Barratt shares for each Redrow share they hold.
The combined entity, to be known as Barratt Redrow, will be predominantly owned by Barratt's shareholders, retaining a two-thirds stake, with Redrow investors holding the remaining stake.
The leadership of the new group will see David Thomas continuing as Chief Executive, Caroline Silver as Chairperson, and Matthew Pratt, Redrow's current CEO, joining the board and overseeing Redrow's operations.
The merger is expected to create an exceptional homebuilder capable of delivering high-quality, sustainable homes. It also presents the opportunity to offer a wider range of energy-efficient homes, enhancing the value proposition to customers.
Steve Morgan, Redrow's founder, expressed confidence in the combined entity's ability to deliver much-needed homes across the UK. The announcement coincides with Barratt's release of interim results, reflecting a decline in pre-tax profit and revenue due to challenging market conditions.
Despite these challenges, Barratt remains committed to providing quality homes to customers across the UK, leveraging the synergies and strengths gained through the acquisition of Redrow to navigate market headwinds.