Housebuilder Barratt will push ahead with its £2.5bn takeover of rival Redrow despite concerns raised by the competition watchdog.
Barratt and Redrow have waived Competition and Markets Authority concerns and intend to complete the takeover “later this week,” the firms said in a stock market statement.
However, the housebuilders add they expect the CMA to place them under an initial enforcement order, which means they can move ahead with integration planning, but cannot formally merge the businesses until they have addressed the watchdog’s concerns.
Earlier this month, the CMA said both firms held plots in Whitchurch, Shropshire — including nearby towns such as Nantwich, Ellesmere and Market Drayton – which raised “competition concerns in the local area”.
The competition body said: “If the deal goes ahead, the CMA found that it could lead to higher prices and lower quality homes for homebuyers in this catchment area.”
But the regulator added that the “deal did not raise UK-wide competition concerns”.
The two firms said today they will work with the CMA to resolve this issue as it is the “only one of the more than 400 local areas where the two companies overlap”.
The takeover was first announced in February, with the merged group expected to build about 23,000 homes a year and have a turnover of more than £7bn.
Barratt chief executive David Thomas, will lead the combined group. Barratt shareholders will retain 67.2% of the enlarged business, leaving Redrow shareholders with a 32.8% share.
AJ Bell investment director Russ Mould said: “Barratt’s acquisition of Redrow is expected to clear within the week, creating a new leader in the UK housebuilding space.
“The issues raised by the competition authorities always looked surmountable given they were restricted to just one part of Whitchurch in Shropshire and Barratt has waived the CMA clearance condition which had been written into the deal.
“An enforcement order from the regulator is likely but Barratt and Redrow are ready for it and will presumably do what’s necessary to prevent the probe going any further.
“The all-share deal should allow Barratt to replenish its landbank – a necessary precondition to ramping up volumes – with prices in the open market not having retrenched as much as might be expected in the current cycle.
“Barratt will hope its timing is good as the industry looks to pick itself off the floor following a difficult few years marred by a weak property market and rising interest rates.
“Speculation could now build over whether either of Barratt’s main rivals – Taylor Wimpey and Persimmon – might pursue their own deal in response.”
Today’s figures show that the number of potential buyers contacting estate agents about homes for sale has jumped from 11% on the prior year in July, to 19% up since the 1 of August compared to the same time a year ago.
Rightmove raised its 2024 forecast from -1% to +1% due to positive market data and trends compared to the much more subdued 2023.
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