Bovis-Redrow set for £1bn deal

TWO OF Britain's leading housebuilders are set to open talks over a £1bn merger that is likely to spark a new round of deals in the sector, the Evening Standard has revealed.

Bovis Homes, of Kent, led by chief executive Malcolm Harris, and North Wales-based Redrow, are behind the plan.

Informed City sources say the plan is still at an early stage but is expected to be discussed by at least one of the companies' board of directors in the next few weeks.

The proposal is said to have gained impetus in the past fortnight, when both firms reported strong results amid improving demand for new homes.

Under a tentative management structure hammered out by advisers, Bovis chief Harris would take up a similar role at the enlarged group, while Redrow's Paul Pedley would become chief operating officer.

A green light from both camps would push the enlarged group into the premier league of housebuilders, ranking among Britain's top five by market value, with annual profits comfortably above £200m and a huge land bank stretching across the UK.

It would also step up pressure on rivals to pursue similar tie-ups to gain economies of scale and access to more land.

Earlier this month, Taylor Woodrow announced a £480m agreed takeover of Wilson Connolly. In 2001, Taylor was again in the takeover fray when it snapped up Bryant for £525m, while arch-rival Persimmon bought Beazer Homes for £612m.

A link-up between Bovis and Redrow is likely to be presented to shareholders as a merger of equals as Bovis, with a market value of about £566m, is only a shade larger than Redrow (£523m).

However, a deal may enable Redrow's founding director Steve Morgan and his ex-wife to reduce their combined 15% stake. Morgan cashed in about £100m of Redrow shares in 2000, when he gave up the role of chairman to 'downshift' his involvement at the group he set up with a £5,000 loan at the tender age of 21.

Rumours of a link between Bovis and Redrow have been circulating in the City for several weeks but have yet to be confirmed by either.

Each group boasts a land bank that would fulfil a four-year building programme. Both also have a good track record in buying land cheaply and boosting its value.

Spokesmen at Bovis and Redrow had nothing to add, saying it was company policy not to comment on stock market speculation.