Bovis Homes has agreed to pay Galliford Try £300m in cash for Linden Homes and Galliford Try Partnerships. It will also take on £100m of transferred debt and issue £675m of new Bovis shares to existing Galliford Try shareholders.
The deal, which is subject to shareholder approval on both sides, comes less than four months after Galliford Try rebuffed a previous £1bn approach from Bovis for its Linden and Partnerships divisions.
Bovis Homes chief executive is Greg Fitzgerald, who previously had the same job at Galliford Try for many years.
Galliford Try said that the sale would leave it as “a well-capitalised construction group, which together with the recent restructure and focus on its core operations, see the business in a strong position for the future”.
Galliford Try’s 2018 group revenues of £3.1bn included £947m from Linden Homes and £475m from Partnerships. Construction accounted for £1.7bn of group revenue. However, profits tell a different story. Linden Homes made an operating profit of £184.4m and Partnerships £23.6m but Galliford Try Construction made an operating loss of £29.1m last year.
Galliford Try chief executive Graham Prothero said: “The transaction is an exciting opportunity to create two strategically focused businesses. The significant cash element within the consideration provides a firm foundation for our newly reorganised Construction business to flourish as an independent company. The strong balance sheet and excellent fit between the combining businesses will be a superb platform for both private housebuilding and partnerships, creating a unique and well-positioned housing provider.
“Much remains to be done before we can present all the details to our shareholders and wider stakeholders. However, if completed, this deal will generate significant value for shareholders and a bright future for all three of our businesses.”
Greg Fitzgerald said: "While discussions are still at early stages, this potential combination represents an exciting and transformational opportunity to create a leading UK housebuilder with enhanced scale, well-positioned to make the most of current opportunities and drive forward on our commitment to delivering high-quality homes and excellent service that our customers and housing partners deserve. We know that we only succeed as a business if we succeed for them.
“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.
“Based on my familiarity with the businesses and the compelling strategic rationale, I think this is a massive opportunity and as a substantial shareholder of Bovis Homes, my intention is to subscribe to the placing if the transaction proceeds."
Bovis Homes has also reported its half-year results today, which show pre-tax profit up 20% to £72.4m on revenue up 9% to £472.3m. In the six months top 30th June 2019, Bovis Homes completed 1,647 new homes (2018 H1: 1,580).
Greg Fitzgerald said of these numbers: “We delivered an excellent first half performance with a significant step up in our sales rate, record profits and a further strengthening of our balance sheet. The group has transformed over the past two years and we are consistently delivering high quality new homes with very high levels of customer satisfaction, as demonstrated by the significant improvement in our HBF rating over the past 12 months. The fact that we are now trending at a 5-star level is testament to the continued hard work and dedication of our team.
“We are very well positioned for the second half and expect to deliver another strong performance in the year.”