Redrow Gets Bid Approach Led by Chairman Steve Morgan
Bridgemere Securities Ltd., led by Morgan, Toscafund Asset Management LLP and Penta Capital LLP said they may offer 152 pence a share for Redrow, according to a statement today. That’s a penny more than yesterday’s closing price and would value the company at about 562 million pounds ($887 million).
“I would sit tight and take the offer,” said Rachael Applegate, an analyst at Panmure Gordon & Co. (PMR) “There’s been on- and-off rumors for a number of years that Steve Morgan was keen to take Redrow back if the stock market didn’t value it fairly.”
Morgan, 59, left Redrow in 2000 and returned as chairman a decade later after becoming disappointed that the company’s homes appealed to lower income buyers. He founded the homebuilder in 1974 and said Redrow was “in my blood” in a 2010 interview. Morgan bought 15.4 percent of Redrow stock in May, increasing the stake he controls to about 40 percent. Toscafund owns a 13.8 percent stake, the statement said.
“Clearly we feel that our offer represents a healthy premium for shareholders,” Charles Armitstead, a spokesman for Morgan, said in an interview today. Redrow spokeswoman Lucy Legh declined to comment.
Redrow, based in Flint, Wales, climbed 4.1 pence, or 2.7 percent, to 155.1 pence at the 4:30 p.m. close of trading in London, the highest since November 2009. The shares, which gained 3.8 percent yesterday, reached a high of about 545 pence in December 2006. Redrow is the smallest company in the Bloomberg EMEA Home Builders Index of seven stocks, which has risen about 35 percent this year.
In February, Redrow reported first-half pretax profit that beat analysts’ estimates. Like other U.K. homebuilders, the company has increased earnings by selling more houses, which are more profitable than apartments. British house prices rose the most in 2 1/2 years in August, Nationwide Building Society said today.
Redrow will form a committee of independent directors to consider the approach, the company said in a separate statement. It asked shareholders to take no action at this time.
The approach represents a 2.5 percent premium to Redrow’s net asset value, according to Applegate, who has a hold rating on the shares. A takeover would be the biggest U.K. homebuilding deal since 2007, when Taylor Wimpey Plc was formed through the 5 billion-pound merger of Taylor Woodrow and George Wimpey. Taylor Wimpey’s market value today is 1.66 billion pounds.
“I don’t see any other bidders emerging, but if the offer goes away then Redrow won’t trade at a premium to NAV,” she said by telephone.
Morgan started Redrow as a civil engineering company after borrowing 5,000 pounds from his father. He moved into homebuilding five years later and went on to buy soccer team Wolverhampton Wanders after his offer to acquire Premier League team Liverpool was rejected.
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