Barratt Developments’ Share Price Fell 9.3% on a £2.52Bn Merger

The Barratt Developments PLC (LON: BDEV) share price fell 9.26% after the residential property development company announced plans to acquire Redrow Plc, another UK homebuilder, in an all-share deal valued at £2.52 billion. 

Barratt agreed to acquire Redrow shares at 600p a share, marking a 27.2% premium to Redrow’s closing share price as of 6 February 2024. The all-share deal is expected to be completed via a court-sanctioned scheme of arrangement led by Redrow under Part 26 of the Companies Act. 

Investors' adverse reaction to Barratt Developments' share price indicates that they think the company is overpaying to merge with Redrow. On the other hand, Redrow shares were up slightly, signifying that investors think the company is getting a good deal. 

The leadership teams at Barratt and Redrow are confident that their merger will establish a premier homebuilding entity in the UK, characterised by outstanding quality, customer service, and commitment to sustainability. 

The merger is expected to enhance innovation and excellence for customers, employees, subcontractors, and suppliers. By merging, the two entities will leverage their compatible regional presences and the esteemed reputations of their three brands—Barratt Homes, David Wilson Homes, and Redrow. 

This strategic alliance aims to expedite the provision of much-needed housing throughout the UK while offering shareholders the chance to benefit from the increased value creation within the newly formed organisation.

On a different note, Barratt Developments released its half-year results for the six months ended 31 December 2023. The homebuilder reported a solid operational performance with 6,171 homes completed (compared to 8,626 in the first half of the previous year) and generated revenue of £1.9 billion (down from £2.8 billion in the prior period). 

The company’s adjusted pre-tax profit of £157.1 million decreased from the £521.5 million recorded in the previous year. There were additional expenses of £61.9 million related to legacy property costs (an increase from £20.0 million), leading to a reported pre-tax profit of £95.2 million (down from £501.5 million).

Barratt Developments share price. 

The Barratt Developments share price fell 9.26% to trade at 481.40p from Tuesday’s closing price of 530.50p.