UK housebuilder Barratt Developments has agreed to buy rival Redrow in a deal worth £2.5 billion, as two of the country’s biggest developers come together to accelerate the building of “much-needed” homes.
Barratt said it will buy the entire share capital of Redrow, creating a combined business which they plan to rename as Barratt Redrow.
The deal values Redrow at £2.52 billion and represents a premium of about 27% for shareholders, based on the closing price of Redrow shares on Tuesday.
On completion of the merger, which must first be approved by both shareholders and the financial regulator, Redrow investors will hold about a third of the combined group and Barratt shareholders two-thirds.
David Thomas, chief executive of FTSE 100-listed Barratt, said the business has “great respect” for its competitor.
“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,” he said.
Redrow’s boss, Matthew Pratt, said the merger will create a “leading UK homebuilder” and leave both businesses “in a much better position to offer a broader range of high-quality and energy efficient homes” to buyers.
The tie-up is expected to lead to cost savings of at least £90 million a year, with a one-off cost of making these savings of about £73 million, the companies said.
This is expected to partly be achieved by a restructuring of staff and offices as they “retain the best talent” from both organisations and cut overlapping roles.
It could lead to the loss of about 10% of jobs across the combined business.
Barratt said it does not expect to significantly reduce building site-based or sales office-based staff because existing sites will continue to run in a similar way.