Banner sale heralds D-Day for private housebuilders

News that Banner Homes, a Buckinghamshire housebuilder that went private in 1999, is up for sale has prompted speculation about the future of other firms in a similar position.

City sources say a memorandum of sale has been issued for the £43m-turnover company, and that a shortlist of bidders has been drawn up. The the firm was unavailable for comment as Building went to press.

This has led to predictions that the venture capitalists that funded management buyouts in other housebuilders are about to try to recoup their investments while the market is near its peak.

This could lead to takeovers by rival firms, managements taking larger stakes or outside investors coming into play.

Analysts are taking a particular interest in three firms: Ward Homes, Cala Homes and Linden Homes, all of which were the subject of buyouts in 1999 and 2000.

The speculation is that Ward and Cala could be in play in the near future. However one housebuilding source denied that Cala would come on to the market. He said: "I think it is looking to grow rather than sell up. The Banner sale is more a one-off than signifying a trend."

Linden Homes, taken off the stock exchange by chief executive Philip Davies in October 2000, is pursuing an aggressive growth policy and sources say it intends to buy more brownfield land or a rival housebuilder.

Davies says he wants to treble the size of the firm by 2005. It posted a pre-tax profit of £7.8m this month on turnover of £222.9m for the period 21 July 2000 to 31 December 2001.

One major housebuilder said the time was right for venture capitalists to sell up. He said: "The backers usually have seven-year plans but get project fatigue after three."

Leslie Kent, analyst with stockbroker Seymour Pierce, said many private housebuilders might come on the market because funders were under pressure to get their money out before the market fell.

He said: "The funders have looked at the market and have seen it is probably as good as it gets – they think it can only get worse and so they want out. And because the market is so good, they should get a good price."

Kent added that a sale to another housebuilder was the most likely option.

Banner was bought by a management team led by chief executive Richard Werth at the start of 1999.

One senior investment banker said that 3i, the venture capitalist that backed the deal, intended to sell its stake. It is understood that US investment bank Merrill Lynch will oversee the sale.

Sources said buyers would be looking at Banner's strategic landbank. The source said: "The firm has a lot of luxury homes that are taking time to shift but the landbank is very good."