Analysts say Bellway’s £720m bid for Crest Nicholson faltered after firm decided ‘risks were too high’

Analysts have been giving their reaction to Bellway’s decision to call off its pursuit of Crest Nicholson.

In a brief update to the Stock Exchange yesterday, Bellway said “it does not intend to make a firm offer for Crest Nicholson” but did not give any further explanation.

Bellway had had two earlier offers for the firm rebuffed before making a £720m bid at the start of last month which Crest Nicholson said it was minded to recommend.

But the deal, which would have created a £4.3bn turnover business, is now off and in a note broker Investec said: “While we are somewhat surprised that Bellway does not intend to make a firm offer for Crest Nicholson, it was always subject to due diligence.

“While the implied value of the most recent proposed offer looked reasonable for both parties to us, our belief it would happen did assume Bellway would be satisfied in its due diligence to confirm that the land bank and any risk around provisions were comfortable for it to deliver a good return from any potential deal.

“No reasons have been given for the announcement not to make a firm offer, but it is reasonable to assume that Bellway believed the risks to delivering a good return from the deal were too high.

“From Bellway’s point of view, it did not need to do the deal given its good land bank and showing discipline around making any acquisition should reassure the market.”

Meanwhile, Anthony Codling, managing director at RBC Capital Markets, said the move would hit Crest Nicholson’s recovery efforts which are now being masterminded by new boss, former Persimmon COO Martyn Clark who took over from Peter Truscott in June.

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He said: “Without a bid on the table we suspect that the path to recovery will be a long and winding road ahead for Crest Nicholson’s long suffering shareholders, but no doubt incoming CEO Martyn Clark will be glad he will get a chance to make his mark.

“Meanwhile, Bellway’s engine is firing on all cylinders, so we question whether it needs to buy the misfiring Crest Nicholson.”

In the six months to April, Crest Nicholson made a £31m pre-tax loss on revenue down 9% to £257.5m, compared with a £28m profit the previous year. Crest Nicholson is due to announce a trading update on 21 November.