Builders back in talks over £1.1bn merger

BoVIS homes is back in talks with Galliford Try about a takeover of its housing businesses in a £1.1bn deal.

The two firms revived discussions just months after Galliford rebuffed a £ 1.05bn approach in may.

Bovis said the housebuilders had agreed ‘high-level terms’ after it raised its offer by £25m to £1.075bn but that there was still significant work to do before a deal is signed.

It would more than double Bovis’s housebuilding capacity, taking it from constructing a projected 4,000 homes this year to 10,000 per year.

Galliford’s boss, Graham Prothero, said the roots of the deal dated back to 2017, when his firm made a bid for Bovis. That failed deal resulted in Bovis poaching Galliford’s boss, Greg Fitzgerald, to turn the business around after it was battered by a scandal over poorly built homes.

Prothero added that the discussions between the two companies earlier this year had reached an interesting stage before ‘some idiot leaked it’, which aborted the talks.

Bovis wants Galliford’s partnerships and regeneration division, which works with councils to provide housing in poorer areas, and its linden homes brand. That would leave Galliford to focus on its ailing construction business, which has worked on projects including the East midlands airport runway refurbishment and a relocatable polar research station in antarctica.

Galliford issued a profit warning in april, admitting it would have to cut down its construction business to shore up its finances.

Bovis, listed on the FTSE 250 index, is the smallest of the major UK housebuilders. It will pay £300m in cash, give Galliford shareholders 63.7m Bovis shares and take on the pension schemes and £100m debt private placement.

Bovis will issue new shares and take on more debt to cover the £300m cash payment.

affordable homes are seen to be a more reliable revenue stream for builders, as demand does not vary in an economic downturn as much as in the private sector. The Government also announced a £3bn programme in march to build 30,000 lower-cost houses.

Bovis shares slid by 3.5pc, or 37p, to 1022p, while Galliford rose 8pc, or 49p, to 664p.