Social housing rivals prepare to merge in North-South link

SOCIAL housing developer Keepmoat is planning to merge with rival Apollo Group to create a £1bn turnover company with the aim of becoming a market leader in community regeneration and social housing.

The combined business will operate under the Keepmoat family of companies, which is headquartered in Doncaster.

Apollo, which has around 1,000 staff, will continue to operate under its own name from its headquarters in Waltham Abbey, Essex.

Sign up to our Business newsletter

Sign up to our Business newsletter

David Blunt, the present chief executive of Keepmoat, will be chief executive of the enlarged business, with Peter Warry, Apollo’s non-executive chairman, as non-executive chairman.

The combined business will operate as separate divisions with regional focus. Allen Hickling will be responsible for the Northern regions and Dave Sheridan for the Southern regions.

Mr Blunt said it was too early to say what the value of the companies was under the merger.

He said the deal was born out of a conversation with Mr Sheridan at the Chartered Institute of Housing Annual Conference in Harrogate in June.

“We seem to be weathering the storm pretty well, considering, and with Apollo working in the South the prospect of a merger came naturally during our conversation,” he said.

In the year to the end of March 2011, Apollo posted revenues of £367m, compared to £346m the year before; earnings before interest, taxes, depreciation, and amortisation remained flat at £22m.

In the same year, Keepmoat posted revenues of £682m, compared to £604m the previous year, while earnings before interest, taxes, depreciation, and amortisation also remained flat at £70m.

Mr Blunt said there was little geographical overlap as both companies covered different parts of the country and he insisted they were not looking to reduce the size of the workforce. “Never say never, but (job losses) is not the purpose and that is not where the benefits are.”

Mr Blunt said the combined business would benefit from a number of cross-selling opportunities. In particular, Apollo will help to strengthen Keepmoat’s maintenance capabilities in the North and Keepmoat will boost Apollo’s new build offering in the South.

It is hoped that the move will enable the companies to share resources and expertise to deliver a nationwide service. In particular, Apollo will help to strengthen Keepmoat’s maintenance capabilities in the North and Keepmoat will boost Apollo’s new build offering in the South.

Mr Blunt said: “We are looking at more holistic approaches to the market place.”

He added that the market place was the company’s biggest challenge. “There is the challenge of the Government’s austerity measures coming into play,” he said.

As a result, the company is looking at different ways of working. “We are looking at market-making opportunities rather than tendering opportunities,” he added.

Keepmoat is already involved in a number of public private sector partnerships including projects in Hull and Durham.

Mr Blunt said: “We are anticipating more public private sector partnerships between local authorities and companies like Keepmoat.

“We continue to satisfy investors and our profits are going up year on year. We are in a difficult market and working hard on our market position and the strengths of all our people.”

Keepmoat and Apollo have been part of the same investment portfolio since 2007 which has in turn been owned by Cavendish Square Partners since July last year. Cavendish is majority owned by private equity investor Coller Capital.

The merger is expected to complete between October and December following regulatory clearance from the Office of Fair Trading (OFT).

Mr Blunt said: “The bringing together of these two businesses represents a compelling proposition for shareholders, customers and employees alike. In this challenging economic climate we will create a national champion in our market with substantial opportunities for growth.”

Mr Sheridan added: “Operationally this deal is a very positive step forward for both companies. Together we will be able to offer our customers an unrivalled service that truly differentiates us from the competition. I am very confident in our future prospects together and look forward to reporting on our progress in due course.”

The remaining board members will be John Thirlwall (finance) and Peter Hindley (homes for private sale). Tom Allison, who has chaired Keepmoat for the past three years, will remain in position until the merger is complete.