Monday, June 17, 2019
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Bovis approaches the rival Galliford Business News

Two of Britain's largest home builders have already started secret talks on a merger two years after the collapse of an earlier series of merger discussions.

Sky News has learned that Bovis Homes Group has turned to Galliford Try for a combination of much of its business in recent weeks.

A deal would be a new catalyst for consolidation in the UK housing sector.

Bovis has a market value of just over £ 1.3bn, while Galliford Try, which owns the Linden Homes house-building brand, is worth £ 550m.

Both are among the top ten home builders in the UK.

City sources said this weekend that the prospect of an agreement between the two sides was unclear.

A Bovis insider warned that it was unlikely that Galliford would be interested in Trys' troubled construction department, which was recently responsible for a profit warning for the group.

They added that the construction arm could be listed as an independent company or sold to third parties.

This would have an impact on the structure of a transaction, as the unit accounts for the largest part of Galliford Try's turnover despite low margins.

If they were to seek a full merger, a combined company could be valued by the stock exchange at around £ 2 billion.

A significant portion of Bovis bid for part or all of Galliford Try is likely to be in stocks, sources said over the weekend.

Galliford Try said last month that the cost of the Queensferry Crossing Road Bridge in Scotland would require a write-off of up to £ 40m for the device.

The multi-million pound hit was the latest example of the pain inflicted on British construction companies. Kier recently replaced his Chief Executive Officer and Finance Director after an embarrassing receptionist request.

The collapse of Carillion last year and the difficulties of Interserve, which has a poor construction business, underlined the crisis affecting large sections of the sector.

This week, Galliford Try said it would reduce up to 350 jobs in its construction business as part of a plan to streamline its focus.

This step was led by Graham Prothero, who took over the management of the company in March.

His predecessor Peter Truscott quit to join rival Crest Nicholson.

Bovis' approach is a reversal of the situation in 2017 when Galliford Try tried to take on his then-smaller rival.

At the time, Bovis was struggling to reverse a sharp decline caused by a crisis that affected the quality of new homes and the non-fulfillment of construction goals.

Bovis eventually turned down offers from Galliford Try and Redrow, another home builder, and recruited Greg Fitzgerald, the former head of Galliford Try, as its executive director.

Mr. Fitzgerald is expected to make the most recent attempt to combine the residential construction activities of the two companies, creating a top five player in the UK market.

Bovis may also be interested in the regeneration business of Galliford Try, though the extent of that interest this weekend was unclear.

Mr. Fitzgerald would almost certainly lead the extended home construction that would arise if Linden were added to Bovis's business.

Bovis' approach underscores the asset shifts of the two companies, although both have suffered a loss of value over the last year.

Bovis shares fell almost 19% during this period, while those of Galliford Try fell well over 40%.

The two companies are likely to come under pressure in the coming days to clarify details of their discussions on the London Stock Exchange.

In the last round of talks in 2017, Galliford Try investors agreed to receive just over half of the share capital of the merged business.

The approach of Bovis is also for housing in a sensitive moment, with competitors like persimmon under strong political pressure to justify gains made on the Government's Help To Buy program.

Bovis and Galliford Try refused to speak on Saturday.


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