Jan. 4 (Bloomberg) -- Taylor Woodrow Plc and George Wimpey Plc, the U.K.'s two biggest homebuilders, may become takeover targets as a housing boom lures private-equity buyers.

``It is possible that one of the big four might be bought,'' said Chris Millington, an analyst at Bridgewell Securities in London. ``Maybe Taylor Woodrow or Wimpey. The big four are also the likely consolidators.''

Wilson Bowden Plc, which said Nov. 27 it is considering bids, may fetch 2.4 billion pounds, a record for a house builder, Mark Hughes, an analyst at Numis Securities said in a Dec. 14 interview. Barratt Developments Plc and Persimmon Plc, the third- and fourth-largest builders, may also be acquired, he said.

U.K. house prices will rise 7 percent this year as demand outpaces supply, according to Nationwide, the third-biggest mortgage lender. The August purchase of McCarthy & Stone Plc by a buyout group led by HBOS Plc for 1.1 billion pounds marked the biggest ever acquisition of a U.K. homebuilder. The prospect of further takeovers may spark mergers in the industry, which has 18 billion pounds ($35 billion) in annual sales.

Shares of Wilson were little changed at 2,269 pence, Persimmon declined 14 pence, or almost 1 percent, to 1,519 pence and Taylor fell 5 pence, or 1.2 percent, to 425 pence; Wimpey and Barratt were little changed.

Private Equity Bid

``A private-equity bid is quite possible'' for Wimpey and Taylor, said Stuart Fraser, a director at Brewin Dolphin Holdings in London, which oversees $41 billion. ``The companies appear not to be overly ambitious, although that may change if private equity comes in and puts the pressure on.''

Of the 11 publicly traded homebuilders in the U.K., Solihull-based Taylor and London-based Wimpey have the lowest price-to-earnings ratios at 7.5 and 7.46, respectively. Barratt has a ratio of 8.2 and Persimmon's is 10.62. Bridgewell's Millington has a ``neutral'' rating on Taylor and a ``underweight'' on Wimpey.

Of the 13 construction and property stocks Millington covers, his estimates rank in the top three most accurate on almost half, according to Bloomberg data.

Shares of Taylor rose 12 percent last year and Wimpey 16 percent, while the FTSE 250 Index of middle-ranking U.K. companies advanced 27 percent. Persimmon shares rose 21 percent, more than the benchmark FTSE 100 Index, which gained 11 percent.

Private equity firms announced a record $200 billion of takeovers in Europe in 2006, compared with $120 billion a year earlier, according to data compiled by Bloomberg. Using their own funds and debt to pay for takeovers, they try to improve profits by bolstering sales, making acquisitions and cutting costs. The firms typically sell the companies within five years.

Barclays, Permira

After an unsuccessful bid for McCarthy & Stone, Barclays Capital and Permira Advisers LLP are among the buyout firms that have expressed interest in homebuilders and property companies, Millington said. Attracted by rising house prices, 3i Group Plc on Dec. 12 agreed to pay about 941 million pounds for Countrywide Plc, the U.K.'s largest real estate broker. 3i, Europe's biggest publicly traded buyout firm, had last made a property purchase six years ago.

Taylor may fetch 3.2 billion pounds, Hughes said. That's 25 percent more than its market value of 2.55 billion pounds, similar to the 31 percent premium in the McCarthy & Stone purchase. Colette Ord, an analyst who worked with Hughes at Numis said he has left the company. She didn't give details. Wimpey may garner bids of as much as 2.7 billion pounds, 19 percent more than its market value, Hughes estimates.

Taylor Woodrow spokesman Ian Morris declined to comment as did Charlotte Barker, an external spokeswoman for Wimpey.

Appetite Will Remain

``Private-equity appetite will remain, possibly even for a pretty large deal,'' said Tobias Woerner, an analyst at Man Securities in London.

Home orders for 2007 at both Wimpey and Persimmon are above year-earlier levels, totaling more than 700 million pounds each, the companies said in statements published in late December.

``We will have to wait and see how the housing market pans out,'' said Andy Brough, a fund manager at Schroder Investment Management in London who helps oversee $8.8 billion including stock of Bellway Plc, Redrow Plc and Bovis Homes Group Plc. ``House building stocks have had a good 2006 and there may be more consolidation. A merger is a possibility.''

Home Ownership

British enthusiasm for home ownership has helped fuel 36 straight quarters of economic expansion under Prime Minister Tony Blair, as soaring property values spurred consumers to borrow and spend. Seventy percent of homes are owner-occupied, compared with 56 percent in France and 41 percent in Germany, according to the Royal Institute of Chartered Surveyors, a London-based lobbying group for real-estate practitioners.

Barratt also may acquire another builder, Millington said. After 26 years with one small purchase, the Newcastle upon Tyne- based company will make an acquisition if the right opportunity beckons, Chairman Charles Toner told investors in London on Nov. 28. Barratt has a market value of 3 billion pounds and its net income declined in 2006 after 13 years of growth.

Consolidation among U.K. homebuilders to form another ``mega-company'' is a likely scenario and a Bovis-Redrow tie-up would be attractive, Millington said, because it creates a company with a nationwide presence.

Barratt spokesman Terry Garrett declined to comment, as did Jon Simmons of Wilson Bowden. Bovis spokeswoman Emily Bruning declined to comment.

``Barratt could buy Wilson Bowden, but I think that is as big as one of the house builders might go,'' said Man's Woerner, who has a ``neutral'' rating on Barratt. ``Never say never. Nothing can surprise me anymore.''

To contact the reporter on this story: Sophie Kernon in London at skernon@bloomberg.net

Last Updated: January 4, 2007 11:55 EST