Bovis in Talks to Buy Rival’s Housing Units for $1.2 Billion

LONDON (Capital Markets in Africa) – Bovis Homes Group Plc has restarted talks to buy Galliford Try Plc’s housing division after discussions earlier in the year broke down.

The potential deal could see the Galliford’s housing business valued at 975 million pounds ($1.2 billion), plus 100 million pounds of debt, bringing the total valuation with debt to 1.075 billion pounds, the company said in a statement on Tuesday. More work is needed before the tie-up of Bovis and Galliford’s unit Linden Homes and Partnerships & Regeneration divisions could be completed, according to the statement.

“While discussions are still at early stages, this potential combination represents an exciting and transformational opportunity to create a leading U.K. housebuilder with enhanced scale,” Greg Fitzgerald, chief executive officer of West Malling, Kent-based Bovis, said in the statement.

The possible deal is the latest twist in a long-running courtship between the two companies. The firms were in talks about a potential deal in May, but Galliford rejected the bid that valued the units at 950 million pounds, excluding debt. In 2017, it was Bovis that rebuffed the advances of Galliford, ending merger talks and hiring Fitzgerald as its CEO. Fitzgerald headed Uxbridge, Middlesex-based Galliford for 10 years, a company he joined as a teenager, before leaving in 2015.

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Galliford rose as much as 26% in London trading, the most since 1995, and were almost 14% higher at 9:51 am. Bovis fell as much as 5.6%.

Supported by cheap borrowing, a ready supply of land and government incentives, the environment for the country’s housebuilders remains benign. That may change, however, with uncertainty surrounding the departure of the U.K. from the European Union that could bring higher costs of labor and materials and weaker consumer confidence.

“While we recognize that there is significant complementarity between the businesses in terms of location, product and culture, we remain cautious of the disruption of integrating two significant businesses together,” Jefferies analyst Glynis Johnson wrote in a note on Tuesday. “We believe the market will question the timing of such a large deal at this stage in the cycle given all the political and economic uncertainties.”

Under the deal, Bovis would pay 300 million pounds in cash to Galliford. In addition, Galliford shareholders would receive 0.57406 of Bovis shares per Galliford share, valued at 675 million pounds at yesterday’s close. The firm’s 100 million pounds of 10-year notes and its pension schemes will also transfer to Bovis.

The 300 million-pound cash transfer will be financed by new debt and an equity placing by Bovis of 9.99% of capital, the company said in the statement.

Source: Bloomberg Business News