(Alliance News) - Housebuilder Bovis Homes Group PLC on Tuesday said it has resumed talks to acquire peer Galliford Try's housebuilding businesses.
Bovis shares were down 5.0% early Tuesday at 1,006.00 pence each, giving it a market capitalisation of GBP1.35 billion, while Galliford's shares were up 16% at 715.25p for a market cap of GBP794.2 million.
In a joint statement, Bovis Homes and Galliford Try clarified that the talks solely related to a merger of Bovis with Galliford Try's housebuilding units and not with Galliford Try itself.
Bovis said Galliford Try would be a "well-capitalised, standalone construction-focused group" owned entirely by Galliford Try shareholders.
Back in May, Galliford rejected a GBP1.05 billion bid by Bovis for Galliford's Linden Homes and Partnerships & Regeneration businesses.
Bovis said on Tuesday the potential deal would value the two housebuilding businesses at GBP1.08 billion.
Under potential transaction terms, Bovis would issue shares worth GBP675 million to Galliford Try shareholders, pay GBP300 million in cash, and takeover Galliford Try's 10-year debt private placement of GBP100 million.
Bovis would issue 0.57406 new Bovis shares per Galliford Try share, equating to 63.7 million shares in total. Shares in Bovis on Monday closed at 1,059.00p. If the combination proceeds, Galliford Try shareholders would own around 29% of the enlarged Bovis Homes company.
Bovis said the GBP300 million cash element of the potential deal will be funded by an equity placing, a debt raising, and the utilisation of existing balance sheet resources.
Bovis and Galliford Try said the potential transaction would generate significant synergies and create substantial shareholder value. The synergies are expected to originate from both Bovis Homes and Galliford Try and comprise both operational and procurement savings.
"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," said Bovis Homes Chief Executive Officer Greg Fitzgerald.
Added Galliford CEO Graham Prothero: "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."
Separately, Bovis Homes reported a 20% increase in pretax profit for the six months to June 30 to GBP72.4 million from GBP60.2 million a year before. Revenue rose 9% year-on-year to GBP472.3 million.
The company declared an interim dividend of 20.5p, up 8% from 19.0p a year ago.
