A major housebuilder in Britain said that it had made a £650m offer for a competitor developer, as the construction sector is struggling with a severe recession.
Bellway informed investors that Crest Nicholson rejected the offer made last month in an update sent to them after Thursday’s market close.
Bellway, which is based in Newcastle, said that a possible agreement would have a “compelling financial and strategic rationale”. It claimed it would enable Crest Nicholson’s debt to be reduced and allow Crest Nicholson “to benefit from the combined business’s scale.”
Bellway, a housebuilder listed on the FTSE 250 index and valued at around £3.2bn is the fifth-largest company in the London Stock Exchange. Crest Nicholson’s share price dropped almost 12pc Thursday, and its value was £547m at the close of markets.
The rejected offer was revealed on the day Crest Nicholson announced a £31m (£17.8m) loss for the six-month period ending in May. This loss was fueled by a wider slump in the housing sector.
Bellway’s announcement of Thursday night, made without Crest Nicholson consent, stated that it is not certain that an official offer will be made.
It has now until the 11th of July to announce its next approach.
This comes just months after Barratt Developments announced a £2.5bn acquisition of RedRow. High mortgage rates have prompted consolidation in the British housebuilding industry, which has led to a decline in new home sales.
Crest Nicholson shares fell more than 8pc Thursday due to the latest financial results.
In its most recent update, the developer has slashed the profit forecast for this year from 38.9m to 22m-29m. This is a far cry from the analysts’ original expectation of £38.9m.
The company also reduced its expectations for the number new homes that it will deliver this year, from 1,800-2,000 to 1,800-1,900.
The bosses blamed high mortgage rates, economic insecurity and planning delays for the poor results.
The company’s most recent results are the last set of results for departing chief executive Peter Truscott. His departure was announced in early January, after Crest Nicholson reported that its profits had dropped by 70pc.
Martyn Clark joined the company on June 3, and will take over as CEO on Friday.
Crest Nicholson has said that he will have to deal with the continued delays in planning, which are holding development back.
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