Crest Nicholson board: Bellway offer 'significantly undervalues' business

Housebuilder Crest Nicholson said today that a £650 million bid from larger rival Bellway “significantly undervalues” the FTSE 250 firm, as it said it planned to forge its own path instead of being taken over.

Bellway revealed yesterday - after Crest Nicholson shares tumbled on the back of disappointing results - that it had made a bid for Crest last month, which was rejected. Under the bid, Bellway would  pay 0.094 of its own shares for every Crest share. Crest shareholders would own 17.1% of the combined business.

However, Crest Nicholson’s board unanimously rejected the offer. Today, they said: “The board of Crest Nicholson evaluated the revised proposal with its financial advisers and concluded that it significantly undervalued Crest Nicholson and its future standalone prospects and was not in the best interests of Crest Nicholson's shareholders.

“Crest Nicholson remains confident in its standalone prospects.”

Under the City Code on Takeovers, Bellway has until 11 July to decide if it wants to make a firm offer.

Peel Hunt analysts Sam Cullen and Clyde Lewis said: “Given the structural returns headwinds the sector is facing (lower margins and reduced asset turn), we believe the deal makes strategic sense for both parties. A larger group should allow bigger, dual-branded sites with higher reservation rates, without compromising absorption rates.”

The bid followed an earlier offer made in April, of 0.089 Bellway shares per Crest share.

Crest Nicholson shares rose by as much as 10% this morning to 234p, erasing most of yesterday’s losses and valuing the business at £588 million.

Bellway shares fell by 88p, or 3.3%, to 2630p, valuing the business at £3.1 billion.

The bid is the latest sign of consolidation in the housebuilding sector, as high interest rates and planning challenges have made it difficult to build. In February, Barratt Developments and Redrow agreed a £2.5 billion merger, in a combination that Finalto market analyst Neil Wilson described as the pair “huddling together for shelter”.