Bovis Shares Jump Amid Takeover Talks With Galliford TryBy and
Bovis says bids don’t reflect homebuilder’s underlying value
Search for CEO successor to Earl Sibley is ‘progressing well’
Bovis said on Sunday that talks are ongoing with Galliford Try after it rejected an offer from the company. It ended discussions with Redrow Plc over an earlier bid. The stock climbed as much as 10 percent and was up 7.3 percent at 888.50 pence as of 10:03 a.m., above Galliford Try’s offer price, which valued the company at 1.2 billion pounds.
Bovis is searching for a new chief executive officer after David Ritchie stepped down Jan. 9. It has struggled recently, saying last month said it would complete 10 percent to 15 percent fewer homes this year as it slows work to correct customer-service issues. The shares have risen less than 1 percent this year through last week, compared with a 10 percent rally in the FTSE 350 Household Goods & Home Construction Index.
“Neither proposer is desperate to do this deal as land is readily available in the open market, but there is scope to improve operating margins at Bovis significantly,” Liberum Capital Ltd. analysts including Charlie Campbell wrote in a note to clients Monday. ”We still think there could be other potential buyers.”
Any deal would be the first significant consolidation among U.K. homebuilders since the merger of George Wimpey and Taylor Woodrow in 2007 formed Taylor Wimpey. Mergers and acquisitions in the sector have been less attractive due to the relative ease of buying land, Patrick Bergin, chief operating officer of Crest Nicholson Holdings, said in an interview in January.
Galliford Try said Sunday that it offered 886 pence a share, 7 percent more than Bovis’s closing price of 828 pence on March 10. Galliford Try said the all-share offer would give its investors 52.25 percent of the combined company, with Bovis holders getting the rest.
“The board of Bovis reviewed the proposals and concluded that neither reflected the underlying value of the Bovis business and therefore both should be rejected,” the company said in a statement on Monday. “Redrow subsequently indicated that it was not willing to improve the terms of its proposal and discussions were terminated. Discussions with Galliford Try are ongoing.”
Redrow, which has a market value of about 1.8 billion pounds, said it made an initial approach to Bovis on Feb. 27, when Bovis’s share price was 774 pence.
The share-and-cash offer was rejected on March 6 with Bovis’ board saying the proposal didn’t merit further discussion, Redrow said. Redrow said its bid was 1.25 pounds per share in cash plus 1.32 new shares, for a total consideration of 659 pence for each Bovis share. That would rise to 814 pence when the 30 pence a share dividend was included, Redrow said Sunday in an email.
“Redrow continues to believe the potential combination offers a compelling opportunity to create a combined business with the scale and operational strength to compete more effectively in the growing U.K. housebuilding market,” it said in the statement.
Separately, Bovis said in the statement that the search for Ritchie’s replacement is “progressing well.” Finance Director Earl Sibley is serving as interim CEO.