What the Barratt deal means for the sector

Barratt will join Persimmon in the FTSE 100, the top table of British industry, when the deal goes through. This means that the City’s tracker funds, which invest in all the top 100 companies, will elevate its share price.

It also removes at a stroke the sixth biggest housebuilder in the UK, judged on the basis of number of units completed, a place that will be taken by Redrow Homes.

Surrey-based Gladedale Homes, which completed 2,801 units in 2005, looks likely to step up to the top 10.

Wimpey, which launched its own bid for Wilson Bowden, remains in third place. But many analysts believe that the consolidation process has a way to go, and that Wimpey is more likely to be prey than predator.

Barratt and Galliford Try are not the only housebuilders to show their appetite. One analyst said Redrow’s well-known interest in Wilson Bowden showed that it may mount a takeover bid for Wimpey.

He said: “The building blocks are in place for Wimpey and Redrow, although I think it will be a more long-term thing than in the near future. Redrow were in the running for Wilson Bowden, which is much bigger than it, and it has the ability to raise equity, so never say never to them buying a bigger rival.”

However, Redrow could well be a takeover target itself, along with Bovis Homes.

Persimmon triggered the latest wave of housebuilder mergers in 2005 when it bought fellow top 10 firm Westbury.

Roger Humber, the former chief executive of the Home Builders Federation, who advises the National Federation of Builders’ House Builders Association, warned that the track record of mergers indicated that this week’s tie-up would result in a decreased overall housing supply.