Barratt/Redrow merger to ‘drive supply chain innovation’

Housebuilder Barratt has agreed a deal to buy rival Redrow, allowing the combined business to make £90m in cost savings, it announced this morning.

An announcement to the London Stock Exchange said that the £2.5bn deal, which would make the new firm the biggest housebuilder in the UK, would drive innovation for customers, employees, subcontractors and the supply chain.

The one-off costs of the merger were listed as £73m, with approximately 57 per cent incurred in the first year following completion.

David Thomas, group chief executive of Barratt, said: “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.

Steve Morgan, Redrow’s founder 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 UK.”

Under the terms of the proposed merger, Redrow shareholders will, in aggregate, receive approximately 476 millon shares in the new group, to be named Barratt Redrow.

Redrow will operate as a premium brand under the main group.

Cost savings will come from procurement savings and a reorganisation of divisional and central functions, the announcement said.

In addition, the combined company expects to increase volumes from the “combined and complementary land pipeline” which stood at 92,000 plots at the end of last year.

Julie Palmer, partner at business recovery specialist Begbies Traynor, said the deal was evidence of the current downturn in the housing market.

She said: “Across the board, housebuilders have had to slash forecasts and cut costs but the inevitable evolution of this was always going to be more consolidation.

“At such a premium, Barratt is demonstrating its ambition and confidence in its future success.

But she added that if the housing market improves and Barratt gets the deal over the line and deliver its efficiency savings “it could be a winner at the end of all of this.”

For the deal to complete, the proposal still has to be approved by regulators and shareholders.


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