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The business news that matters
Hello and welcome to the latest edition of Off to Lunch…
There is a big UK takeover today - Barratt Developments has agreed a deal to buy rival housebuilder Redrow for £2.5 billion. This will bring together the second and sixth largest housebuilders in the UK by stock market value to create the largest, overtaking Taylor Wimpey.
This is a quick summary of the deal:
-The enlarged company will be called Barratt Redrow Plc
-It is an all-share deal in which shareholders in Redrow will receive 1.44 new shares in Barratt
-Barratt shareholders will make up 67.2 per cent of the enlarged company, Redrow 27.2 per cent
-Steve Morgan, the founder of Redrow, has backed the deal. Morgan’s family investment vehicle owns 16 per cent of Redrow and is the largest shareholder
-The deal values Redrow shares at a 27 per cent premium to what they closed at on Tuesday night
The stock market’s reaction to the deal is interesting. Redrow shares have risen more than 13 per cent while Barratt is down more than 7 per cent. That fall for Barratt is also linked to disappointing half-year results that the company has published today, which underlines the pressure on the housing market. Barratt said that the number of homes it had sold fell 29 per cent year-on-year to 6,171 in the six months to the end of December 2023, pushing revenues down 34 per cent to £1.9 billion. Pre-tax profits for the six months were £95 million, down 81 per cent on the £502 million in the same period in 2022.
Redrow will be positioned as the premium housing brand within the wider group and the companies expect to save up to £90 million in annual costs following the deal. Barratt and Redrow generated a combined £7.5 billion of revenue and built 22,642 homes in 2023.
This is what David Thomas, Barratt’s chief executive, said about the deal:
”We have great respect for Redrow, its overall strategy, its leadership and employees, and its high-quality homes and communities. This is an exciting opportunity to bring together two highly complementary companies, creating an exceptional homebuilder in terms of quality, service and sustainability, able to build more of the high-quality homes this country needs.”
Morgan said:
"During the 50 years since I founded Redrow, I could not be more proud of the unique reputation it has earned for building premium homes and thriving communities.
“Barratt is a home builder I have long admired due to their like-minded attention to quality. I am confident that the Barratt / Redrow combination with their three high-quality complementary brands, will create a standout home builder for the future and accelerate the delivery of much-needed homes across the UK."
You can find the statement on the deal here
Other stories that matter…
1. The UK should create a Centre for Infrastructure Excellence that gathers best practice on building big projects. It should also set out a multi-year strategy on infrastructure, reform the planning system and target a minimum viable product on projects so that more is not built than needed. That is according to a report by Boston Consulting Group on why the UK pays more for infrastructure than other countries. You can read the report, which has been released today, here. On a related note, a new report by the Public Accounts Committee says HS2 offers “very poor value for money” without Birmingham and Manchester being connected. You can find that report here
2. Adam Neumann is working on a deal to buy back WeWork, five years after he was ousted from the company that he co-founded. More from The Guardian here
3. If you can’t beat them, join them: A collection of big US sports broadcasters including ESPN, Fox and Warner Bros Discovery are to team-up to launch their own streaming platform for sport. Story here
4. Sticking with media, publishers are moving away from a subscription-only model and instead offering flexible paywalls, membership and adverts, according to a report by Axios. This includes Substack experimenting with helping publishers find advertisers for their content. You can read that Axios story here
5. Bluesky, a Twitter-style social media platform, is opening to the public from today and ditching its invitation-only approach. Bluesky was developed inside Twitter by former chief executive Jack Dorsey but then spun out of the company before it was bought by Elon Musk. It looks a lot like Twitter used to. You can read more in the Platformer tech newsletter here
Podcast…
The latest episode of our Business Leader podcast features an interview with Marc Allera, the chief executive of EE and BT’s consumer business. He explains how EE went from being an upstart mobile phone brand to a key part of BT and a business with big ambitions for the future. Plus, Allera explains what he learned from launching Sega’s Dreamcast games console and mobile phone brand Three in the early 2000s, which had mixed success.
You can listen to the episode via Substack here, Apple here or Spotify here
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Best
Graham