Crest Nicholson, the embattled housebuilder, has rebuffed a second all-share takeover approach from its larger rival Bellway valuing the group at about £650m.
The FTSE 250 housebuilder this week reported losses in the first half and slashed its dividend in its latest profit warning as it continued to be hit by volatile mortgage rates and slowing demand in the housing market.
Crest said in a statement that it had rejected an all-share preliminary proposal from Bellway received on 14 May. The proposal would have resulted in Crest investors receiving 0.093 shares in Bellway for each of their current shares. This would value Crest shares at about 253p – a 19% premium.
In a statement Crest said the approach underestimated the value of its future standalone prospects. It confirmed it had rejected an earlier all-share approach from Bellway on 25 April in which it had proposed Crest investors would receive 0.089 shares in its rival.
Bellway said in a separate statement it believed there was “compelling strategic and financial rationale” for a combination of Bellway and Crest Nicholson because of lower indebtedness and a larger landbank. It added that the deal could offer significant operational synergies.
Shares in Crest – which have halved over the past three years – jumped by 8% to 230p in early trading.
Crest Nicholson has been under pressure after issuing a string of profit warnings in the past year. Its chief executive, Peter Truscott, announced earlier this year he would step down to be replaced by Martyn Clark, who started in the role on Friday.
Crest this week reported a pre-tax loss of £30.9m in the six months to the end of April, down from £28.4m in the same period a year earlier. It expects to make an adjusted pre-tax profit of £22m-£29m for the full financial year, below analyst forecasts of almost £39m.
The latest approach by Bellway comes as housebuilders battle a challenging market while homebuyers struggle with higher mortgage rates. Confidence in the UK’s housing market has begun to falter as interest rate cuts are not now expected until much later this year.
There has already been consolidation in the housebuilding sector. Barratt, the UK’s biggest housebuilder, proposed a £2.5bn all-share acquisition of its smaller rival Redrow earlier this year. The merged group Barratt Redrow is expected to build 23,000 homes a year and have a turnover of more than £7bn. Legal & General is also in the process of marketing Cala Homes, a private homebuilder.
