Crest Nicholson Rebuffed Bellway’s £650 Million Takeover Bid

(Bloomberg) -- UK homebuilder Crest Nicholson Holdings Plc said it rejected a takeover bid from rival Bellway Plc last month because the offer price was inadequate.

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The all-share proposal at an implied 253 pence apiece, valuing Crest Nicholson at about £650 million ($827 million), represents a premium of 18.8% over Thursday’s closing price. This followed an earlier approach that “fundamentally undervalued Crest Nicholson and its future prospects,” the company said in a statement Friday.

Bellway made the approach because there is a “compelling strategic and financial rationale” for the combination, the firm said in a separate statement Thursday. Crest Nicholson shares rebounded as much as 10% on Friday. They slid 12% the previous day — the most since September 2020 — after the firm cut its full-year profit guidance on the back of a higher than expected exceptional charge relating to land remediation costs.

“The challenges at Crest continue after a strong start to the spring selling season momentum softened following Easter, and it is unlikely that Crest will get its mojo back” until after the general elections scheduled for July 4, Anthony Codling, head of European housing research at Royal Bank of Canada, said in a note before Bellway disclosed its offer.

Bellway has until 5 p.m. on July 11 to disclose whether or not it intends to make another offer, according to the statement.

The past year has been turbulent for the nation’s developers as higher interest rates deterred buyers, increased their cost of capital and depressed their share prices. With sentiment slowly improving on expectation of lower interest rates, the sector is seeing an uptick in consolidation attempts.

Barratt Developments Plc agreed to buy rival Redrow Plc earlier this year in a proposal that would create the UK’s biggest homebuilder. The combination, which still needs regulatory approval, would give Barratt access to Redrow’s vast land bank just as both the main political parties make pledges to increase housing output in the next parliament.

The UK’s housing market has been helped by government intervention over the past decade with stimulus measures becoming a major driver of sales for homebuilders. The Labour Party, which is ahead in the polls, has pledged to build 1.5 million homes over the next five years should it win the elections next month. Any policies introduced to stimulate construction will likely be a boon for homebuilders.

(Updates with analyst’s comment in fifth paragraph.)

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