The UK housebuilder Bellway has walked away from a £720m takeover bid for its smaller rival Crest Nicholson after months of negotiations.
Bellway said it “does not intend to make a firm offer for Crest Nicholson”, without giving any reasons.
It said: “Bellway remains confident that its robust balance sheet and operational strength, combined with the depth and quality of its land bank, will enable Bellway to deliver volume growth in the years ahead and support ongoing value creation for shareholders.”
Both firms are listed on the FTSE 250, where Bellway shares rose by almost 4% but Crest shares plunged by 18% to 215p, making them the biggest faller in the index by mid-afternoon. Bellway’s latest all-share proposal, in July, implied a value of 273p a share.
Crest said on 10 July it was “minded” to accept Bellway’s improved all-share bid of £720m, after rejecting two earlier approaches in April and May as too low, the latter valuing the business at £650m. Crest also rebuffed a rival proposal from Avant Homes, the housebuilder controlled by the New York hedge fund Elliott.
Last Thursday, Bellway and Crest extended the deadline for negotiations to 20 August, saying they needed more time, while “good progress has been made on reciprocal due diligence with a number of elements satisfactorily completed by both parties”.
Crest said on Tuesday it had engaged with Bellway in response to a series of unsolicited proposals from the company, but it remained “confident in its standalone prospects”. It said it had reviewed provisions for completed development sites supported by external consultants, under the new leadership of Martyn Clark.
Unlike Bellway and other housebuilders which have benefited from a pickup in demand amid lower mortgage rates, Crest reported losses in the first half and slashed its dividend in its latest profit warning in June.
Bellway said last week it had exceeded its housebuilding targets for the past year, while Persimmon raised its housebuilding forecasts for this year, saying it had been encouraged by the new Labour government’s planning reforms and improved consumer confidence after the recent Bank of England rate cut.
Two other housebuilders, Barratt – which is the UK’s biggest – and Redrow are due to combine in a £2.5bn deal. The UK competition regulator said last week it had found one area where it had concerns, around a Barratt development in Whitchurch and nearby towns. It asked the two companies to submit proposals to address these.
Anthony Codling, a housing analyst at RBC Europe, said: “Bellway has a strong track record of organic growth, and we were concerned that the acquisition of Crest would take it into untested waters. As we said last week, ‘With the Bellway engine firing on all cylinders, we question whether it needs to buy the misfiring Crest Nicholson – if it ain’t broke, don’t fix it.’ Therefore, we are glad that Bellway is no longer seeking to purchase Crest.”
On Crest, he said: “If any other bidders do come forward we expect any offer would be less than that intimated by Bellway, given that they have had plenty of time to look under the bonnet and kick the tyres and chosen not to proceed.
“The challenge now is for the new CEO to turn the fortunes of Crest around. We would not be surprised if guidance is cut before the next set of results. We continue to believe that Crest’s share will underperform the sector. Without a bid on the table we suspect that the path to recovery will be a long and winding road ahead for Crest’s shareholders.”
