In a surprising turn of events, Bellway has decided to abandon its £720 million takeover bid for Crest Nicholson, just as the deal seemed poised for completion. After two months of negotiations, Bellway confirmed it would not proceed with the acquisition, sending Crest’s shares plummeting by 20.7% to 208p, while Bellway’s stock rose by 4.1% to £29.32.
The merger would have positioned the combined entity as the third-largest housebuilder in the UK, trailing only Barratt Developments and Vistry. Bellway initially approached Crest in April, but its initial offers were rejected. An improved proposal last month seemed promising, with Crest’s board indicating a willingness to accept. However, despite an extension for due diligence, Bellway has now walked away without providing a specific reason.
Industry analysts speculate that an issue uncovered during due diligence may have altered Bellway’s risk-reward assessment. Sam Cullen of Peel Hunt suggested that Bellway might have found a problem significant enough to deter the acquisition. Crest has faced challenges, particularly with the costs associated with fixing dangerous cladding and other issues at older sites, which may have contributed to Bellway’s decision.
Despite the setback, Crest remains optimistic about its standalone prospects. The company reassured shareholders of its confidence in its future, even as it continues to address legacy issues. Crest’s new CEO, Martyn Clark, who took the helm in June, now faces the task of steering the company towards recovery.
The market anticipates that Crest will remain a takeover target. Avant, led by former Persimmon boss Jeff Fairburn, and Persimmon itself, which is currently courting Cala Homes, are potential suitors. However, any new bid is unlikely to match Bellway’s offer of approximately 273p per share.
Anthony Codling of RBC Capital Markets noted that Clark would likely welcome the opportunity to make his mark on Crest, despite the challenging road ahead for the company’s shareholders.
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