Barratt’s £2.5bn buyout of Redrow set to complete despite watchdog’s concern
Housebuilder Barratt is set to complete its purchase of Redrow later this week, despite a UK watchdog saying local competition concerns need to be addressed for the £2.5bn takeover to go ahead.
The company said it is temporarily putting aside concerns from the Competition and Markets Authority (CMA) so it can go ahead with the buyout.
The CMA said earlier this month that the acquisition could lead to higher prices and lower quality homes in one area; in and around Whitchurch, Shropshire.
It did not flag any concerns about the merger on a national level.
Barratt said on Monday that Whitchurch represents just one of more than 400 areas where the two companies overlap, and that both firms are working to come up with solutions to address those limited concerns.
This, it hopes, will avoid the investigation being taken further and mean the businesses will get the regulator’s green light to merge.
Barratt said completing the acquisition, following a court hearing scheduled for Wednesday, would remove any uncertainty for staff, the supply chain and wider stakeholders of both businesses.
The decision also means it expects the CMA to impose an enforcement order on both firms, which would prevent Barratt and Redrow from integrating their two businesses until the regulator is happy its concerns have been dealt with.
The two firms are expecting to have fully merged within 18 months of the acquisition, with efficiencies and cost savings due to take shape after three years.
The tie-up is expected to lead to cost savings of at least £90 million a year, with a one-off cost of making these savings of about £73 million.
This is expected to partly be achieved by a restructuring of staff and offices as they cut overlapping roles, which could lead to the loss of about 10 per cent of jobs across the combined business.
Earlier in August, Joel Bamford, executive director for mergers at the CMA, said: “Prospective homebuyers must not be disadvantaged as a result of deals like this one – with the potential loss of competition leading to even higher house prices or lower quality homes.
“Our initial investigation found concerns specifically in one area in and around Whitchurch.
"The companies now have the opportunity to agree workable solutions which address our concerns rather than move to a more in-depth investigation.”
A spokesman from the CMA said on Monday: “Whilst we are aware of Barratt’s intention to complete its deal with Redrow imminently, our competition concerns still stand. The CMA will take such action as appropriate to ensure competition is preserved whilst our investigation continues.”