UK homebuilder Crest Nicholson rejects £667mn bid from rival Bellway

Housebuilder Crest Nicholson has rejected a £667mn takeover offer from rival Bellway, marking the latest deal push in the UK housebuilding sector as it battles a downturn triggered by high interest rates.

FTSE 250 builder Bellway confirmed late on Thursday that it had made an all-share offer for the smaller group following a report by React News, in an announcement landing hours after the fifth profit warning from Crest Nicholson in just under a year.

Despite being at a 19 per cent premium to its closing share price on Thursday, Crest Nicholson on Friday said the proposal “significantly undervalued” the business and its “future standalone prospects”.

The move by Bellway follows Barratt’s successful bid for Redrow earlier this year, a £2.5bn deal that would consolidate its position as the UK’s largest housebuilder. L&G is also in the process of marketing Cala Homes, a private homebuilder.

Bellway said on Thursday that the deal would bring significant efficiencies and offer Crest Nicholson investors, who would receive shares in the combined group, “a reduced risk profile, lower indebtedness and an enhanced land bank”.

The update comes after Crest Nicholson reported it had swung to a £30.9mn pre-tax loss in half-year results on Thursday, and warned that profits would fall this year. The group has struggled, even in the context of widespread gloom in the homebuilding sector, because of building defects at older sites and buyers put off by high mortgage costs.

Investec analyst Aynsley Lammin said Crest Nicholson had “performed very poorly relative to the sector over the past 18 months”.

In January, it reported annual pre-tax profits had dropped 70 per cent and cut its profit forecasts, blaming remediation costs to fix the building issues at four sites. Crest Nicholson also faces a legal claim from M&G over a 2021 fire that badly damaged a block of flats built by the housebuilder and owned by the UK asset management group.

Anthony Codling, analyst at RBC, said the fifth profit warning since last August had “weakened Crest’s hand” and that the company “appear[s] to have ingrained operational issues” despite a turnaround effort by outgoing chief executive Peter Truscott.

Codling added that Crest Nicholson might be reluctant to sell since the offer price was at a discount to book value and could be read to imply that the company’s land bank was overvalued.

Bellway’s proposed offer was equivalent to about 253p per Crest Nicholson share, a premium of 30 per cent to the latter’s share price at the time it was made in May, and valued the business at £667mn.

Crest Nicholson said on Friday it had unanimously rejected an earlier offer from Bellway in April.

Crest Nicholson said it “remains confident in its standalone prospects” under the leadership of new chief executive Martyn Clark, given its strong land portfolio and having completed a review of the costs linked to its older building sites with external consultants.

Bellway has until mid-July to make a further offer or withdraw from the pursuit.

The takeover battle comes as L&G is trying to sell Cala Homes. FTSE 100 group Persimmon is one of the potential buyers, according to a person familiar with the matter.

Barratt’s £2.5bn deal for upmarket housebuilder Redrow has faced scrutiny from the Competition and Markets Authority, which is probing the housebuilder sector — a hurdle that other deals in the industry could also face.