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The UK competition watchdog has opened a preliminary probe into the £2.5bn acquisition of housebuilder Redrow by rival Barratt, marking the latest competition investigation to hit the housebuilding sector this year.
The deal, announced last month, would create a company building 22,000 homes a year with combined revenues of £7.5bn, and comes as developers weather a property market downturn.
The Competition and Markets Authority said on Friday that it was looking at whether the tie-up would “result in a substantial lessening of competition within any market or markets” in the UK, and was seeking views from interested parties by April 2 before launching a formal probe.
The takeover would secure Barratt’s position as the UK’s largest housebuilder, adding Redrow’s more upmarket homes to its range of products. When the deal was announced, Barratt chief executive David Thomas told the Financial Times he was “very confident” it would be signed off by the CMA.
In a note on the acquisition last month, analysts at Jefferies said previous CMA reviews in the sector had “considered geographical concentration” and the companies’ land banks. “We see limited areas of concern,” Jefferies said.
The new probe comes after the CMA last month launched a separate investigation into eight of the largest UK housebuilders, including Barratt and Redrow, over whether they shared commercially sensitive information.
The probe emerged from a year-long study of the housebuilding market that looked into the persistent under-delivery of homes in the UK, in response to concerns about the housing shortage.
The regulator said commercially sensitive data about the rate of sales, prices and incentives might have been shared between the groups. It said this could “weaken competition” but was not “one of the main factors in the persistent under-delivery of homes”.
The wider study largely blamed the UK’s “complex and unpredictable planning system” and an overreliance on speculative private developers to provide the nation’s housing needs.
The practice of holding a stockpile of land for future development was criticised, but the CMA found that so-called land banking was not significantly distorting competition and was mainly the result of the slow planning system making it difficult to get permission to build.
The CMA said on Friday that it had decided to look at Barratt’s Redrow deal, but was seeking comment before officially launching a competition probe.
The tie-up was the first move to consolidate by two big national developers since the property market slumped in the wake of higher borrowing costs. Vistry struck a £1.25bn deal to buy Countryside in 2022.
Barratt said: “We are confident that the combination of Barratt and Redrow is in the best interests of customers and will accelerate the delivery of the homes this country needs. We look forward to working constructively with the CMA as they undertake their review.”
Redrow did not immediately respond to a request for comment.
