The housebuilder Barratt is pushing ahead with its £2.5bn takeover of rival Redrow this week despite concerns raised by the government’s competition watchdog.
Barratt said on Monday that it would waive conditions put on the deal – due to be completed this week – from the Competition and Markets Authority (CMA) after it found that the merger could disadvantage homebuyers in the area around a town in Shropshire.
The housebuilder will now push ahead with getting court signoff for the deal on Tuesday, which, if granted, would result in the suspension of trading in Redrow shares on Thursday and new Barratt shares being issued by Friday.
However, CMA rules mean that the full operational integration of both businesses cannot start until the watchdog’s conditions are met.
Barratt, the UK’s largest housebuilder, agreed a deal to buy Redrow in February, with the merged group expected to build about 23,000 homes a year and have a turnover of more than £7bn.
The CMA launched an investigation into the deal in March and concluded earlier this month that while it had no concerns around the deal on a national level, the merger would result in the “substantial lessening of competition” around Whitchurch in Shropshire.
It said that both businesses held large areas of land in the area and if the deal went ahead this could lead to higher prices and lower-quality homes in the area.
Barratt said on Monday that the concerns focused around just one of the 400 local areas in which the companies operated, and there were fewer than 10 plots remaining to sell.
It added that it continued to engage with the CMA to agree undertakings to address the watchdog’s “limited concerns” and avoid a further investigation.
Because of its confidence in addressing the CMA’s concerns, it has decided to waive the conditions so that the legal combination of the two groups can be completed after court signoff this week. It added that this would “remove uncertainty for the employees, its supply chain and wider stakeholders”.
Waiving such conditions is an option open to companies but will result in an initial enforcement order being issued by the CMA.
The order allows legal completion to take place but it prohibits the companies from full integration until its concerns are resolved.
This means that that both businesses will continue to have to operate separately until an agreement is made with the CMA, which will mean delays to the appointment of board members to the new combined group and will stop the company from taking on the name of Barratt Redrow until then.
Barratt said that it wanted to begin full integration as soon as permissible and it still intended to fully integrate the plan within 18 months.
Barratt’s chief executive, David Thomas, will lead the newly combined group. Barratt shareholders will retain 67.2% of the whole group, leaving Redrow shareholders with 32.8%.
The Redrow brand will be used for marketing new homes and its Heritage Collection, aimed at more affluent buyers.
Shares in Barratt were up 4% on Monday after it said it was pressing ahead with completion, making it one of the top risers on the FTSE 100. Redrow shares rose 2%.
