Bovis Homes sealed a deal for UK builder Galliford Try’s residential business on Thursday, more than doubling the size of its housing development business and making it the fifth largest player in a struggling British market.
Under the cash-and-share deal initially proposed in September and due to close in January, Bovis will buy Galliford’s Linden Homes and Partnerships & Regeneration businesses for 1.08 billion pounds ($1.39 billion).
Galliford shareholders will hold a stake of 29.3% in the enlarged Bovis Homes and Galliford Chief Executive Officer Graham Prothero, 57, will become Bovis’ Chief Operating Officer.
The head of the smaller builder’s construction unit, Bill Hocking, will replace Prothero and be left with what the company said would be a “well-capitalized stand-alone construction business”.
Like many of its peers, Cowley-based Galliford has suffered from a Brexit-driven hit to the UK residential market, and its shares have risen 21% since it restarted talks to sell its housing businesses to Bovis in September.
With the deal, Bovis also expands its market share for homes, which already stretch from Cheshire in the north to Hampshire on the south coast, and from Norfolk in the east to Cornwall in the south west.
Its shares are also up 10% since the initial terms of the deal emerged on Sept. 10.
The combination of Bovis and Galliford Try’s residential businesses has the capability to generate profitability at the top end of peers, Jefferies analysts said.
Linden Homes and Partnerships & Regeneration together brought in 1.44 billion pounds of sales in 2018. Bovis’ total revenue in the same period stood at 1.06 billion pounds.
Kent-based Bovis said it expects the Galliford housing arms to boost its earnings per share by the low double digits in the first full financial year after completion and said it would retain its Chief Executive Greg Fitzgerald, who was also previously CEO of Galliford.
Bovis in 2017 had rejected an approach from Galliford, known for projects ranging from the redevelopment of the Wimbledon tennis venue to hospitals and city bypasses.
Bovis also announced a placing of up to 13.5 million shares to partly fund the deal, which would bring cost synergies of at least 35 million pounds per annum.
Source: Reuters.com