Bovis back in housing merger talks with Galliford, posts record H1 profit
By Michele Maatouk
Date: Tuesday 10 Sep 2019
(Sharecast News) - Bovis Homes said on Tuesday that it is back in talks with Galliford Try over a potential merger with its housing business after a cash sweetener was thrown into the mix, as it posted record first-half profits.
Galliford rejected a bid from Bovis back in May, arguing that it was not in the interest of all its shareholders. However, the housebuilders said they have now agreed "high-level terms" upon which a deal could be implemented.
"There remains significant work to be completed before definitive transaction documentation can be agreed, including agreement of detailed commercial terms, completion of due diligence and arranging transaction funding," Galliford said.
If the deal goes ahead, it is expected to value Galiford's housing businesses at £1.1bn. Galliford shareholders would receive 0.57406 Bovis Homes for each of their shares, along with a £300m cash payment and the transfer to Bovis of Galliford's 10-year debt private placement of £100m.
News of the renewed merger talks came as Bovis reported a 20% jump in first-half pre-tax profit to a record £72.4m, with group revenue up 9% to £472.3m and total completions 4% higher at 1,647.
The average selling price ticked up 2% to £269,200 during the half and Bovis lifted its interim dividend by 8% to 20.5p a share.
Chief executive Greg Fitzgerald said: "We delivered an excellent first half performance with a significant step up in our sales rate, record profits and a further strengthening of our balance sheet.
"The group has transformed over the past two years and we are consistently delivering high quality new homes with very high levels of customer satisfaction, as demonstrated by the significant improvement in our HBF rating over the past 12 months. The fact that we are now trending at a 5-star level is testament to the continued hard work and dedication of our team.
"We are very well positioned for the second half and expect to deliver another strong performance in the year."
At 0910 BST, Galliford shares were up 15.5% to 710.50p while Bovis shares were down 4.7% at 1,009p.
Neil Wilson, chief market analyst at Markets.com, said: "So what's changed? £300m in cash has sweetened the deal for Galliford it appears, with the previous offer having made up entirely of new Bovis shares. That new cash element will be a welcome injection for the newly reorganised Galliford construction division, which has been struggling after problems with the Aberdeen bypass and the Queensferry crossing. The entire construction contractor sector is in the doldrums post Carillion of course, with overruns and margin destruction now standard.
"It marks a big shift from when the embattled Bovis (contractor problems and build quality issues) faced down a takeover bid from Galliford. Shares in Bovis have risen over 20% since those opportunistic offers from Galliford and Redrow were rebuffed. And for Bovis CEO Greg Fitzgerald, it marks something of a coming home after 30 odd years at Galliford.
"The big question for us now is whether this marks the start of a deal frenzy for housebuilders. On that front I would not be too quick to assume others will follow. Whilst there may be singular reasons to combine businesses, generally speaking there are limited synergies from combining operations."
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN