Feb. 5 (Bloomberg) -- Barratt Developments Plc, the U.K.'s largest homebuilder, agreed to buy Wilson Bowden Plc for 2.2 billion pounds ($4.32 billion) in the biggest-ever takeover of a British construction company.

Barratt will pay 2,257 pence in cash and stock for each Wilson share, the Newcastle Upon Tyne, England-based builder said in a statement today. That's 23 percent higher than Wilson's close on Nov. 24, the last day of trading before the company put itself up for sale.

The takeover, Barratt's second in 26 years, increases the developer's home sales by more than one-third and widens the gap with rival developer Persimmon Plc, which bought Westbury Plc a year ago. A 10 percent gain in house prices last year has boosted earnings and spurred takeovers in Britain's 19 billion-pound homebuilding industry.

``This gives Barratt real muscle and puts them in the big league,'' said Andrew Neville at RCM Ltd. in London, who helps manage $157 million, including Barratt shares. ``It has also upped the game in consolidation. You can assume this sector will end up with three or four large homebuilders.''

Shares of Barratt rose 51 pence, or 4.2 percent, to 1,279 pence. The stock has advanced 35 percent in the past six months, giving a market value of 3.12 billion pounds.

Chairman's Windfall

Ibstock, central England-based Wilson Bowden slipped 1.6 percent to 2,275 pence. Chairman and founder David Wilson, 65, first indicated on July 14 that he might sell his family's near-38 percent stake. He himself stands to gain 687 million pounds in cash and stock, said James Ottignon, a spokesman for the company.

Barratt will pay 950 pence plus 1.06 new shares for each share of Wilson. The takeover surpasses the 1.1 billion-pound purchase of McCarthy & Stone Plc in August by HBOS Plc and retail entrepreneur Tom Hunter and Persimmon's 643 million-pound Westbury deal.

Barratt's houses sell for an average of 175,400 pounds, Wilson's for 203,100 pounds, including the upscale David Wilson Homes brand. Barratt gets 52 percent of revenue in southern England and Wilson is strongest in the Midlands, which contributes 48 percent of sales.

``This will give us access to all markets, which in today's world is key, and creates a powerhouse for growth,'' Barratt Chief Executive Officer Mark Clare said on a conference call. ``The two businesses are an exceptional fit.''

Market Share

The takeover will give Barratt 19,702 home sales on a pro forma basis, or 12 percent of the market, compared with 16,700 at Persimmon, Clare said. The company will also have 600 building sites and its revenue will increase by more than 50 percent to 3.6 billion pounds. Savings should amount to at least 45 million pounds in the second year, with an unspecified number of jobs likely to be cut, the CEO said.

``The value accretion should be good,'' said Tobias Woerner, an analyst at Man Securities in London who plans to lift his rating on Barratt stock from ``neutral'' to ``buy.'' Woerner said that the enlarged company should go straight into the FTSE 100 Index of Britain's biggest businesses.

Consolidation is also accelerating as companies seek to secure access to land and cut expenses as higher mortgage costs threaten to curb demand. The Bank of England has raised its base lending rate three times since August to 5.25 percent.

HBOS, Wimpey

HBOS and Hunter were also in the bidding for Wilson before pulling out of the process, the Financial Times said on its Web site last night, without saying where it got the information. Wilson also received bids from George Wimpey Plc, the London-based Times said on Jan. 24, citing nobody.

Barratt, founded in 1958, is ditching a strategy of growing through the expansion of existing operations rather than via acquisitions. Its only other purchase in more than a quarter of a century was Squire Bridge Ltd., bought for 25 million pounds last June.

The price to be paid for Wilson is two times net asset value, compared with 1.38 times for Persimmon's acquisition of Westbury and 2.6 times for the HBOS purchase of McCarthy, said Simon Brown, an analyst at Evolution Securities in London with a ``buy'' rating on Barratt stock. It represents a 63 percent premium to Wilson's price last July, when the family first announced it was reviewing its holding.

`Good Deal'

``This is a good deal for Barratt,'' the analyst said ``The price is fair, there is significant potential for synergies and with the companies' combined strengths there are excellent growth prospects.''

Lucy MacDonald, a colleague of RCM's Neville, said that the price paid ``looks relatively high'' and that it will be interesting to see whether any other bidders emerge.

Barratt's unit sales increased by 2.9 percent in its fiscal first half through December. Reservations rose 25 percent to a record, even after it trimmed incentives to entice buyers, Clare said in a Jan 12 interview.

Clare said demand in the first few weeks of January was very strong. On the same day, Bellway Plc Chairman Howard Dawe forecast a record year for revenue and completions if current market conditions prevail. Wilson said on Dec. 19 that its order backlog was the strongest in recent years.

U.K. house prices will rise 7 percent this year as demand outpaces supply, according to Nationwide Building Society, the country's third-biggest mortgage lender. In 2006, prices rose 10.5 percent based on Nationwide figures and 9.9 percent according to HBOS Plc, Britain's largest mortgage lender.

David Wilson and his father founded Wilson in 1961 and sold shares to the public in 1987 using an off-the-shelf company, Bowden, as a vehicle, according to Hoover's Inc. The company is Britain's largest homebuilder outside the ``big four'' of Barratt, Persimmon, Taylor Woodrow Plc and Wimpey.

Business Parks, Apartments

The main David Wilson Homes brand offers a variety of houses costing as much as 600,000 pounds for a six-bedroom detached property near Coventry, central England. Wilson Bowden Developments builds offices, industrial properties and business parks and Wilson Bowden City Homes provides inner- city apartments in locations such as Manchester and the Southampton waterfront.

David Wilson was already the fifth-richest construction chief in Britain and the 122nd most-wealthy person, according to the Sunday Times 2006 Rich List. His personal 22 percent stake in the company plus salary, dividends and share sales was valued at 520 million pounds in 2005, the newspaper said last April.

Ownership

Barratt said it would book one-time costs of 35 million pounds to cover the cost of delivering planned savings. Following the purchase the company's shareholders will own 70 percent of the enlarged business; Wilson's will hold 30 percent.

UBS AG acted as adviser and joint broker to Barratt, while HSBC Holdings Plc advised Wilson Bowden and Rothschild the Wilson family. Credit Suisse Group was joint broker to Barratt and Bridgewell Group Ltd. and Morgan Stanley to Wilson.

Slaughter and May provided legal guidance to Barratt. Wilson retained Freshfields Bruckhaus Deringer.

Galliford Try Plc, the U.K. company that's rebuilding Wimbledon's Centre Court tennis arena, said today that it's in exclusive talks to buy Linden Holdings Plc, a closely held homebuilder that has been seeking a buyer.

To contact the reporters on this story: Sophie Kernon in London at skernon@bloomberg.net; Andrew Noel in London on anoel@bloomberg.net.

Last Updated: February 5, 2007 11:59 EST