Merger to create £7bn-turnover housebuilder set to take place this week
The Competition and Markets Authority (CMA) has hinted measures proposed by Barratt and Redrow to alleviate the regulator’s local competition concerns are likely to be accepted.
This would allow the full integration of the two business following their £2.5bn merger, which is expected to take place this week.
The CMA has raised concern that the deal might disadvantage homebuyers in an area around Whitchurch, Shropshire, if a resulting loss of competition leads to higher house prices or lower quality homes. Barratt and Redrow are offering undertakings to remedy this in an attempt to avoid a full-blown ‘phase 2’ investigation that could ultimately halt the deal.
The CMA, in a statement today, said: “The CMA considers that there are reasonable grounds for believing that the undertakings offered by the parties or a modified version of them, might be accepted by the CMA under the Enterprise Act 2002.
“The CMA will publish the full text of the decision shortly.”
Barratt is expected to merge with Redrow this week, after a court sanctioning hearing. This follows Barratt’s decision to waive a condition of CMA approval. Barratt said a court sanctioned scheme of arrangement is expected to become effective later today and no transfers of Redrow shares will be registered after 6pm.
The CMA has served an initial enforcement order preventing full integration of the two businesses to prevent prejudicing its inquiry.
Barratt said as result some actions will await the approval of the CMA, including changing the name of the company to Barratt Redrow, appointing Matthew Pratt to the combined group board along with non-executive directors Nicky Dulieu and Geeta Nanda. Barratt has said it still intends to complete its integration plan within 18 months of the merger completing this week.
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The CMA has until 18 October 2024 to decide whether to accept Barratt and Redrow’s undertakings, with the possibility to extend this timeframe to 13 December 2024 if it considers there are special reasons for doing so.
The merger deal would mean Barratt, already UK’s largest housebuilder, increasing its turnover to more than £7bn (based on 2023 figures), compared with the £4.3bn turnover posted by second biggest builder Taylor Wimpey last year.
The CMA’s concerns are centred on an 11-mile area which contains four Barratt developments and a Redrow development.
The CMA however said it has no competition concerns about the merger, which would create the largest housebuilder in the UK, on a national level.
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