British homebuilder Bovis Homes Group PLC has rejected a bid approach from rival Galliford Try PLC, but remains in negotiations about a possible deal, the firm said on Sunday, adding that it had also rejected a proposal from another suitor, Redrow PLC.
A tie-up between Galliford and Bovis would see the nation’s sixth and eighth-biggest housebuilders combine in search of economies of scale in an industry that has reported rising profits in recent years and so far shown little vulnerability to Britain’s exit from the EU.
Bovis, which lost its chief executive in December last year following a profit warning, said last month it would slow construction this year and focus on improving the quality of its homes after complaints from some buyers.
“Discussions with Galliford Try are ongoing,” a Bovis statement said.
It said an initial all-share offer had been rejected, alongside a share and cash bid from Redrow because neither reflected the underlying value of the firm.
Galliford confirmed it was in talks over a possible purchase, saying it had made an offer that would value the entire issued equity of Bovis at ￡1.19 billion (US$1.45 billion), or ￡8.86 per share.
Bovis shares closed at ￡8.28 on Friday.
Galliford said a merger could “create a new major housebuilder with national scale and geographic coverage,” as well as delivering synergies from combining the two firms’ “operational structures, sourcing and operating practices.”
Its offer proposed an equity split in the combined group of 52.25 percent to Galliford shareholders and 47.75 percent to Bovis shareholders.
Bovis said it had terminated discussions with Redrow after the firm indicated it was not willing to improve its offer.
“The board also concluded that the Redrow proposal was not in the interests of Bovis shareholders as the cash element of the offer would require shareholders to crystallize value at the current Bovis valuation,” the Bovis statement said.
Earlier this year, Bovis said it saw little logic in a merger with another rival, Berkeley, after a media report said an influential Bovis shareholder wrote to Berkeley asking it to consider such a step.
The last major consolidation in the market occurred nearly a decade ago when Taylor Woodrow and George Wimpey merged to form Taylor Wimpey PLC, becoming Britain’s biggest housebuilder at the time.
The sector has been buoyed by a lack of new housing supply, which has pushed up prices and spurred several government schemes designed to support home buying.
However, Bovis has struggled to capitalize on these conditions and last month announced a ￡7 million hiring spree in response to the complaints about poor quality housing.
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