Barratt Developments to Acquire Redrow in GBP 2.5 Billion Deal

In a significant move that has sent ripples across the UK housing sector, Barratt Developments, a leading housebuilder listed on the FTSE 100, has declared its intent to acquire Redrow, its FTSE 250 rival, in a takeover deal estimated at GBP 2.5 billion. This proposed merger, touted to be one of the most substantial in the UK housebuilding industry in recent years, will give birth to a new entity, 'Barratt Redrow', boasting combined revenues of GBP 7.45 billion.

Merger Amidst Market Challenges

The move is being seen as a strategic consolidation effort, designed to strengthen both companies in the face of ongoing economic challenges impacting housebuilders. Following the announcement, the share price of Barratt fell by 6.3%, whereas Redrow's shares witnessed a significant uptick of 14%. The terms of the takeover offer specify that Redrow shareholders will be granted 1.44 new Barratt shares for each Redrow share they currently own.

Shareholder Distribution in the New Entity

This allocation would result in Redrow shareholders owning approximately 33% of the new entity 'Barratt Redrow', with the remaining 67% held by existing Barratt shareholders. The directors of both Barratt and Redrow have urged their respective shareholders to approve the merger.

Interim Results and Declining Dividends

Alongside the merger announcement, Barratt and Redrow also disclosed their interim results, revealing a reduction in dividends in response to a decline in profits and revenues, a trend attributed to an overall 'subdued housing market'.

In related UK property sector news, the Halifax house price index reported a 1.3% rise in January, signifying a potential resurgence in the housing market. This increase marks the fourth consecutive monthly rise, with dropping mortgage rates and easing inflationary pressures contributing to this upward trend.

Apart from the UK, other global financial markets also saw considerable activity. New York stocks closed on a positive note on Tuesday, and comments from Federal Reserve members indicated a cautious stance towards future interest rate cuts. The US Secretary of State Antony Blinken is currently in Israel, working towards a ceasefire in the ongoing conflict with Hamas. The rising tensions in the Middle East have led to a slight increase in oil prices, while European and Asian stock markets exhibited mixed results on Wednesday.