Welsh housebuilder Redrow sold in massive £2.5bn deal

Welsh housebuilder Redrow is being bought out by rival developer Barratt to create the UK's largest housebuilder. The Ewloe-headquartered FTSE 250 firm is valued at £2.54bn in the all-share deal.

The sale will net Redrow's founder Steve Morgan, who still owns 16% of the company, around £400m in shares in the combined housebuilding giant. It is not yet known the merger will have any impact on the Redrow headquarters in Flintshire.

Mr Morgan said: “During the 50 years since I founded Redrow, I could not be more proud of the unique reputation it has earned for building premium homes and thriving communities. Barratt is a home builder I have long admired due to their likeminded attention to quality.

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"I am confident that the Barratt / Redrow combination with their three high-quality complementary brands, will create a standout home builder for the future and accelerate the delivery of much needed homes.”

Barratt said it would expect to be able to make cost savings of £90m a year through the merger but did not give a figure for job losses.

The move by the larger FTSE-100 listed Barratt comes as both firms face challenges amid a troubled housing market with new home sales slowed by higher mortgage rates and the cost of living crisis. Most developers have had to cut costs and slow down their activities.

David Thomas, group chief executive of Barratt, said: “This is an exciting opportunity to bring together two highly complementary companies, creating an exceptional home builder in terms of quality, service and sustainability, able to build more of the high-quality homes this country needs.

“The combined group would leverage the respective strengths of both Barratt and Redrow, delivering significant benefits to our people, our supply chains, and – most importantly – our customers.”

The terms also imply a premium of 27.2% to the closing price per Redrow Share of 600p on February 6. Redrow shares were up 12.8% this morning.

The terms of the deal, which still have to be approved by shareholders, offer a 27 per cent premium over Redrow’s Tuesday closing share price. Barratt on Wednesday announced that its adjusted profit before tax dropped 70 per cent to £157mn and its output fell 28 per cent to 6,171 homes in the six months to the end of December. Redrow also reported a major slowdown in trading.