George Wimpey Plc and Taylor Woodrow Plc agreed to an all-stock merger that will create Britain's biggest homebuilder, the companies said in a joint statement.
Wimpey, the UK's third-biggest builder by houses sold, will hold 49 percent of Taylor Wimpey Plc and Solihull, England-based Taylor, the No. 4 will own 51 percent, the firms said in a Regulatory News Service statement yesterday.
It will be Britain's biggest-ever homebuilder tie-up, creating a company with a value of about ?5 billion (US$9.81 billion).
Takeovers by competitors and a slumping US property market, which accounts for about one-third of their sales, increased pressure on Wimpey and Taylor Woodrow to combine. By cutting expenses and combining land assets, they plan to halt a three-year decline in profitability.
"This merger provides both businesses with a unique opportunity to combine their respective strengths to create the largest UK housebuilder with a much improved position in the US," Norman Askew, chairman of Taylor Woodrow, said in the statement.
Wimpey chief executive officer Peter Redfern, hired last July, will head the merged company. Redfern met with Taylor Woodrow CEO Ian Smith, who joined in November, to discuss the merger, one person said.
Smith is expected to leave and receive a "handsome" payoff, the Sunday Times reported on Sunday, without saying where it got the information.
Shares of Wimpey have gained 25 percent in the past six months and rose 1 percent on Friday.
Taylor Woodrow's have advanced 18 percent in the same period and fell 0.5 percent on Friday.
A shortage of development sites in Britain has encouraged builders to combine in order to cut costs by picking the most lucrative sites from an enlarged land bank and using their size to renegotiate supply contracts for timber, bricks and cement.
The companies last year built a total 31,128 homes, with the US accounting for about one-third of the total.
Barratt Developments Plc last month bought Wilson Bowden Plc for ?2.2 billion in the UK homebuilding industry's biggest-ever deal. That surpassed the ?1.1 billion purchase of McCarthy & Stone Plc in August by British lender HBOS Plc and retail entrepreneur Tom Hunter. Persimmon Plc agreed to buy Westbury Plc for ?643 millions record nine months earlier.
Those transactions, and a slump in the US housing market, prompted Wimpey and Taylor to plan a merger, the people said.
New home sales in the US fell 18 percent last year, the sharpest contraction since 1990, as borrowing costs rose and buyers lost confidence. Taylor's average selling price in North America fell 5.5 percent to US$427,000, while Wimpey last month booked a ?60.7 million charge against the value of US land after it pulled out of options to buy plots.
Each of the UK builders operates in Arizona, Florida, California and Texas, while Wimpey is also present in Georgia.
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