£650m offer“significantly undervalued” business says housebuilder

Crest Nicholson has rejected two takeover offers from rival housebuilder Bellway in the last two months.

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The two housebuilders revealed the double approach in statements to the stock market this morning and last night.

Bellway, which has a turnover of £3.4bn, made an offer to buy the entire share capital of its smaller rival £900m-turnover Crest Nicholson on 7 May.

Under the rejected £650m deal, Crest Nicholson shareholders would have received 0.093 shares in Bellway for each share they hold, with an implied value of 253 pence per share with a premium of around 18.8%. Crest Nicholson would have held 17% of the enlarged group’s share capital.

A Bellway spokesperson said “The board of Bellway believes there is compelling strategic and financial rationale for a combination of Bellway and Crest Nicholson which would bring together the strength of each business with complementary brands”

However, a Crest Nicholson spokesperson said the proposal “significantly undervalued Crest Nicholson and its future standalone prospects and was not in the best interests of Crest Nicholson’s shareholders.”

An earlier, lower offer from Bellway on 25 April to buy the share capital, with shareholders receiving 0.089 new shares, was also unanimously rejected by Crest Nicholson’s board.

Under stock market regulations, Bellway now has until July 11 to return with a new offer or withdraw from the takeover bid.

In a note, broker Investec said: “The offer made for Crest Nicholson looks to be a sensible and opportunistic move by Bellway, in our view. The brands also look complementary, and greater scale and synergies should support higher margins.

“Crest’s comments around its provisioning and its current land bank with its results [yesterday] should also provide more comfort around liability risk and the quality of the land bank from which to earn good margins and returns. We would not be surprised to see a revised offer be forthcoming.”

The news of the takeover bids emerged a day after Crest Nicholson announced it made a £31m pre-tax loss in the six months to April, compared to a £28m profit the previous year. Revenue was also down 9% year-on-year to £257.5m. The figures have been impacted by Crest Nicholson discovering it needs to spend £31.4m to fix build defects.

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Bellway meanwhile last week said it was “on track” to deliver 7,500 homes this financial year, with improved affordability having yielded a strong spring selling season. Bellway is one of eight housebuilders being probed by the Competition and Markets Authority over alleged “anti-competitive behaviour”

A merger of Bellway and Crest Nicholson would create a business with a turnover of around £4.3bn, which would make it the second largest according to Housing Today’s annual Top 50 Housebuilders ranking.