Under the terms of the deal to be put to shareholders, Barratt shareholders will get 67.2% of the combined group and Redrow shareholders will get 32.8%, effectively making it a Barratt takeover.
The deal prices Redrow at £2,524m, a 27% premium to its last close price.
The combined group will be renamed Barratt Redrow plc, with aggregate revenue in financial year 2013 of £7,448m, delivering total completions of 22,642. Redrow will become a third brand and division of the group, alongside Barratt Homes and David Wilson Homes.
Barratt’s existing chair, chief executive, chief financial officer and chief operating officer will all keep the same roles for the combined group. Redrow’s chief executive gets to stay as Redrow chief executive and become an executive director of the combined group.
The board of Barratt believes that joining with Redrow will deliver pre-tax cost synergies of at least £90m a year after three years. The one-off costs of delivering these savings are expected to be approximately £73m, with 57%. incurred in the first year following completion.
Savings will be achieved by shedding 10% of the combined workforce, Barratt said, and the closure of nine offices.
Barratt group chief executive David Thomas said: "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. The combined group would leverage the respective strengths of both Barratt and Redrow, delivering significant benefits to our people, our supply chains, and – most importantly – our customers."
Redrow chief executive Matthew Pratt said: "Redrow and Barratt combined creates a leading UK homebuilder. Together, we'll be in a much better position to offer a broader range of high-quality and energy efficient homes to customers.
“The Redrow brand, with its premium, characterful homes, has an excellent reputation and will remain a key part of the combined group. As with Barratt, Redrow's 50-year success story is based on its people, products and supply chain partners. Both businesses are a great fit and there are many exciting opportunities to innovate and share knowledge across a range of different areas."
Steve Morgan, Redrow's founder, is also Redrow's biggest shareholder, with 16% of the stock via his Bridgemere Securities investment vehicle. He supports the deal and 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 likeminded 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."
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