Bovis in merger battle after receiving offers from Galliford Try and Redrow

bovis
Bovis is vulnerable to bids following its December profit warning

Bovis Homes was at the centre of £3bn bidding battle tonight after spurning competing merger offers from rival housebuilders Galliford Try and Redrow.

Shares in Bovis are expected to surge on Monday after it emerged the troubled builder was being courted by two suitors. If either Galliford or Redrow are successful in clinching a deal, it would mark the first big deal in the housebuilding sector since the financial crisis.

FTSE 250-listed Bovis, which is currently without a chief executive and is led by chairman Ian Tyler, revealed it had rejected an all-share proposal from Galliford and a cash-and-stock offer from Redrow because both were too low.

Bovis said it was continuing to hold talks with Galliford about a possible tie-up but that negotiations with Redrow, the listed housebuilder that is 40pc controlled by founder and chairman Steve Morgan, had ended.

However, in a twist that sets up a potential fight for Bovis, Redrow revealed that despite being snubbed, it still hoped to strike a deal.

There has been speculation that Kent-based Bovis could attract a suitor ever since late last year, when it shocked investors with a profit warning that was followed by the abrupt departure of chief executive David Ritchie in January.

In a further blow, it also emerged that Bovis was offering homebuyers £3,000 cash incentives to complete on deals for unfinished properties before the end of 2016.

The company, which is focused on the south-east and traces its roots back to 1885, conceded at last month’s results that it endured “a difficult year” in 2016, when pre-tax profits fell 3pc to £154.7m.

Redrow had a merger offer for Bovis spurned

Galliford, which is led by boss Peter Truscott and valued at £1.3bn, and Redrow, worth £1.8bn, both made approaches to Bovis after it posted results, although the pair were not aware of their competing offers until this weekend. Bovis shares closed at 828p on Friday night, giving it a market capitalisation of £1.1bn.

The Redrow bid, which was made when Bovis stock was trading at 774p last month, comprised 125p in cash and 1.32 new shares. Including a forthcoming 30p-a-share Bovis dividend, it valued the builder at 814p-a-share and would hand Bovis shareholders 32.4pc of the combined company.

The Galliford offer valued Bovis at 886p-a-share. It would have left Bovis investors with 47.75pc of the new business, with the remaining 52.25pc held by Galliford’s shareholders.

Both proposals have stumbling blocks. As well as being a housebuilder, Galliford has a construction business that operates in a range of markets, including the transport and energy industries. It is understood the Bovis board would prefer a deal with a pure housebuilder.

Meanwhile, Bovis said it rejected the Redrow offer because its cash element “would require shareholders to crystallise value at the current Bovis valuation”. The Bovis board believes its shares are currently undervalued because they slumped after the profit warning.

However, it is thought Redrow might be unwilling to make an all-share offer because that would dilute Mr Morgan’s shareholding in the combined business.

Under Takeover Panel rules, Redrow and Galliford now have until April 9 to make a firm offer or walk away from Bovis.

Please review our commenting policy