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Barratt to buy Redrow in a £2.5Bn deal

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Barratt Developments has sealed a monumental £2.5 billion deal to acquire Redrow, propelling itself to the forefront as the nation’s largest housebuilder.

Pending shareholder approval, this merger will fuse the capabilities of both entities, enabling them to construct nearly 23,000 homes across the UK and generate a turnover of £7.5 billion, based on last year’s figures.

Amidst challenges like heightened mortgage rates dampening home sales over the past 18 months, both firms anticipate that this collaboration will fortify their resilience throughout market cycles.

Forecasts suggest that within three years of integration, synergies could slash £90 million from their combined annual costs. Moreover, Redrow shareholders can anticipate a substantial increase in dividend payouts compared to previous years.

The amalgamation aims to leverage the strengths of three distinct brands—Barratt Homes, David Wilson Homes, and Redrow—under one umbrella. Notably, Redrow specializes in premium housing, particularly larger family residences.

Strategically, Barratt envisions integrating premium offerings into selected sites, while Redrow’s portfolio offers opportunities for Barratt or David Wilson Homes.

This all-paper transaction values Redrow at approximately £2.5 billion—a notable 27 per cent premium over its recent stock market valuation. Redrow shareholders stand to receive 1.44 new Barratt shares for each Redrow share they hold.

In early trading, Redrow shares surged by 13.6 per cent, while Barratt shares initially dipped by 5.4 per cent, reflecting market reactions to the deal.

Upon completion, the combined entity, Barratt Redrow, will predominantly be owned by Barratt’s shareholders, maintaining a two-thirds stake, with Redrow investors retaining the remainder.

Leadership roles within the new group will see David Thomas continuing as Chief Executive, with Caroline Silver as Chairperson and Matthew Pratt, Redrow’s current CEO, joining the board and overseeing Redrow’s operations.

David Thomas expressed enthusiasm, calling the merger an “exciting opportunity” to create an exceptional homebuilder delivering high-quality, sustainable homes.

Similarly, Matthew Pratt highlighted the potential to offer a wider range of energy-efficient homes, enhancing their value proposition to customers.

Steve Morgan, Redrow’s founder, endorsed the deal, expressing confidence in the combined entity’s ability to deliver much-needed homes across the UK.

The announcement coincided with Barratt’s release of interim results, reflecting a decline in pre-tax profit and revenue amidst challenging market conditions.

Nevertheless, with the acquisition of Redrow on the horizon, Barratt aims to leverage synergies and strengths to navigate market challenges and continue providing quality homes to customers across the UK.

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