THE BOARDS of Barratt and Redrow have announced they have reached an agreement to combine the companies, renamed as Barratt Redrow.

The agreement will see Redrow shareholders receive 1.44 Barratt shares for each Redrow share they possess.

In total, Redrow shareholders will receive approximately 476,309,153 new Barratt shares valued at £5.30 each, in total worth £2,524 million – a premium of 27.2% on their Redrow shares.

When the agreement goes ahead later in the year, Redrow shareholders will hold 32.8% of the combined business; Barratt shareholders will hold 67.2%.

Barratt and Redrow directors say they “believe that the combination will create an exceptional UK homebuilder”.

Three Brands

The move will bring together the three brands of Barratt Homes, David Wilson Homes and Redrow. The companies say merging the businesses will “accelerate the delivery of much-needed homes across the UK”.

Redrow is currently seen as a builder of premium houses, and gaining the brand is a strategy that Barratt had previous success with when it acquired David Wilson Homes in 2007.

The agreement to combine the firms comes as both companies published results showing drastically reduced turnover and profits.

Barratt Developments’ second half year results for 2023 show it completed 6,171 homes, down 28.5% on 2022. Revenue also fell by 34% to £1.8bn while profit before tax plummeted by 81% to £95.2m, from £501.5m in 2022.

Redrow results show its revenue fell by almost 25%, from £1.1bn in the first half of 2023 to £756m in the second half. Profit before tax also plunged by, from £198m in the first half of 2023, to £84m in the second half.

Combine Businesses

Barratt says bringing the two businesses together will result in “significant cost synergies from procurement savings and a rationalisation of divisional and central functions which are expected to drive a combined lower cost base.”

It expects to save around £90m by combining the businesses, while the costs of doing so will be £73m in the first three years.

Steve Morgan, Redrow’s founder, who still owns a 16% share in the firm, is said to be “supportive of the combination”.

David Thomas, Group Chief Executive of Barratt, said: “This is an exciting opportunity to bring together two highly complementary companies, creating an exceptional homebuilder in terms of quality, service and sustainability, able to build more of the high-quality homes this country needs.”

Matthew Pratt, Group Chief Executive of Redrow, said: “Redrow and Barratt combined creates a leading UK homebuilder. Together, we’ll be in a much better position to offer a broader range of high-quality and energy efficient homes to customers.”

The businesses say by merging they will offer homes “across a wider range of price points, increasing the combined group’s addressable market.” It expects to be able to increase volumes through a combined current land pipeline of 92,345 plots.

The combination is expected to become effective during the second half of 2024.

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