Bellway, the UK housebuilder, has walked away from a £720 mln (€840 mln) takeover of peer Crest Nicholson dampening m&a activity in the sector.
Bellway provided the shock news on Wednesday just days after a trading statement.
In June it said it had entered into talks with an indicative offer of £650m mln and then upped it to £720 mln when its indicative offer was initially rejected.
At the time, the two companies said the revised proposal would ‘bring together the strength of each business with complementary brands to reinforce Bellway's position as a leading UK housebuilder, while enabling Crest Nicholson shareholders to benefit from the scale of the combined business.’
But in a brief statement on Wednesday, the company said that it did not intend to make a firm offer after all.
It pointed towards its recent trading update of August 9 when Bellway stated it was ‘confident that its robust balance sheet and operational strength, combined with the depth and quality of its land bank, will enable Bellway to deliver volume growth in the years ahead and support ongoing value creation for shareholders.’
A new Labour government came to power on July 5 following the UK general election.
That could have played a part in Bellway’s decision not to proceed with Crest Nicholson because it has been encouraged by Labour government plans.
In its August 9 trading update, the company said: ‘We are encouraged by the new government’s plans to increase the supply of new homes across the country and welcome its plans to reform the planning system.’
‘Overall, the long-term housing market fundamentals are positive, and we remain confident that our robust balance sheet and operational strength, combined with the depth and quality of our land bank, will enable Bellway to successfully capitalise on future growth opportunities.’
Customer confidence among house buyers in the UK has improved, driven by a moderation of both mortgage interest rates and consumer price inflation, and an increase in wages, Bellway has found. Trading patterns were less volatile than the prior financial year when sharp changes in borrowing rates led to significant variations in customer demand.
Bellway added: ‘We have been encouraged by the improvement in affordability during the year and the relative stability in mortgage interest rates since January 2024. This led to a reduction in the cancellation rate to a normalised level of 14% (2023 – 18%) and overall, headline pricing and the level of targeted incentives have remained stable across our regions.’
That mood has changed considerably from a statement in July following Bellway’s sweetened offer of £720 mln when the two companies said: ‘The boards of Bellway and Crest Nicholson believe that there is compelling strategic and financial rationale for a combination of Bellway and Crest Nicholson.’
‘In addition, the board of Bellway believes a combination would deliver significant operational benefits (including procurement synergies) and the ability to open dual outlets on at least 10 current and future Crest Nicholson sites with complementary brands to drive incremental volumes at attractive margins. As part of the combination the board of Bellway intends to retain and deploy the Crest Nicholson brand across the enlarged group (including on Bellway sites).’
Crest Nicholson might yet be taken over. It has also received interest from Avant Homes, owned by New York hedge fund Elliott.
Avant's offer was rejected last month.
The UK housebuilder sector has already witnesed M&A activity as the housing market felt the effects of elevated interest rates.
Barratt Developments and Redrow agreed a £2.5 bn merger earlier this year.
