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UK Builder Bellway Makes £700 Million Takeover Bid for Crest

Flags at the entrance to a Crest Nicholson Holdings Plc new housing development in Tiptree, U.K., on Thursday, Jan. 21, 2021 (Chris Ratcliffe/Bloomberg)

(Bloomberg) -- Bellway Plc has made a new offer to buy rival Crest Nicholson Holdings Plc in what would be one of the UK’s biggest-ever homebuilder acquisitions.

The offer, which values Crest at more than £700 million ($896 million), comes weeks after it rejected Bellway’s previous offer that valued the homebuilder at about £650 million. Crest’s share price rose as much as 5.5% in the first 30 minutes following the news.

“The board of Crest Nicholson has confirmed to Bellway that the revised proposal is at a value that it would be minded to recommend unanimously to Crest Nicholson’s shareholders,” Crest said in a statement. “The boards of Bellway and Crest Nicholson believe that there is compelling strategic and financial rationale for a combination.”

Crest Nicholson rejected Bellway’s previous bid in May because the offer price was inadequate. The builder also rejected a separate offer from Avant Homes in June, which proposed a shareholder ratio of roughly 70/30 in Crest Nicholson’s favor.

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 and policy shake-ups, 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.

Bellway’s all-share proposal, at an implied 273 pence apiece, represents a premium of 28.3% over Crest Nicholson’s June 13 closing price.

Crest Nicholson’s shareholders would receive 0.099 shares in Bellway for each share they own in Crest Nicholson and a dividend of 4 pence per Crest Nicholson share comprising the previously announced interim dividend of 1 pence per share and a special dividend of 3 pence per share conditional on completion of the deal.

The deal could boost Bellway’s land bank, operating leverage and add exposure to the UK’s south, according to Bloomberg Intelligence industry analyst Iwona Hovenko. It also has benefits for Crest Nicholson, whose debt, low-margin sites and trouble with projects may also be more manageable within a larger business, she said.

Bellway has until Aug. 8 to make a firm offer.

(Updates with Crest share price move in second paragraph, Crest statement in third paragraph and Avant Homes offer in the fourth paragraph)

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