Construction giants consider merger

A construction mega-merger is on the cards after Galliford Try emerged as frontrunner in the pursuit of troubled housebuilder Bovis Homes.

Shares in Bovis spiked as the market reacted to a string of weekend announcements that lifted the lid on a takeover tussle for the group.

Galliford Try and rival Redrow revealed they had made offers to acquire Bovis – although they were both subsequently rejected by the Bovis board.

However, Galliford Try remains in discussions with Bovis over a possible acquisition.

If successful, a merger would create one of Britain’s biggest housebuilders capable of producing of 7,000 homes a year, with a combined market capitalisation of £2.4 billion.

In a statement, Bovis said: “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 board also concluded that the Redrow proposal was not in the interests of Bovis shareholders as the cash element of the offer would require shareholders to crystallise value at the current Bovis valuation.

“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.”

Galliford Try, which owns leading Scottish contractor Morrison Construction, said a tie-up would deliver “significant” cost savings by combining their “operational structures, sourcing and operating practices”.

Its initial offer provided a 7% premium on Bovis’s closing share price on March 10 this year and would hand Galliford Try and and Bovis shareholders 52.25% and 47.75% of the combined business respectively.

Bovis said the board was making “good progress” with plans to shore up profitability and its search for a chief executive was “progressing well”.

The group was rocked by complaints over the poor quality of homes.

In February it announced a 3% fall to £154.7 million in full year pre-tax profits and revealed it had set aside £7m to cover remedial works.

Galliford Try subsidiary Morrison Construction worked on Perth and Kinross Council headquarters.