Bovis Homes has revived talks to buy Galliford Try’s housing businesses after improving its potential bid to almost £1.1bn and adding cash to the proposed deal.
The companies have agreed basic terms of a transaction that would more than double Bovis’s housebuilding and expand its affordable homes operation.
Bovis expects to pay Galliford £675m in shares based on its closing share price on Monday plus £300m in cash. It would also take on £100m of Galliford’s debt.
The deal would leave Galliford as a construction and infrastructure business concentrating on bigger projects such as the Aberdeen bypass.
Galliford rejected an all-share approach from Bovis in May that valued the businesses at £1.05bn including debt. The revised proposal is £25m higher and offers Galliford shareholders a large chunk of cash.
Bovis said it planned to raise the cash by selling shares worth 9.99% of its existing share capital as well as using existing funds and raising more debt. Bovis rejected a bid from Galliford in 2017 and hired its rival’s former boss Greg Fitzgerald as its chief executive.
Fitzgerald said: “This potential combination represents an exciting and transformational opportunity to create a leading UK housebuilder.
“Galliford Try’s partnerships business is a fantastic brand, with a very strong position in the UK. Combining it with Bovis Homes’ newly launched partnerships housing division would enable us to become the partner of choice for delivering more affordable homes at a time when these are needed the most.”
The deal would enlarge Bovis’s housebuilding business to about 10,000 homes a year from a projected 4,000 this year. Bovis would also gain an established affordable homes business with an order book of more than £1bn to expand its own business, which it launched this year.
The government announced a £3bn programme in March to fund the building of 30,000 affordable homes by providing Treasury backing to housing associations.
Bovis shares dropped 3% to £10.26 in early trading, while Galliford Try shares rose 20% to 737.5p.