Wimpey creates UK housing giant

Wimpey creates UK housing giant
Shares go through the roof as £6 billion deal between Taylor Woodrow and George Wimpey topples Barratt from the number one slot Steve Hawkes and Dominic Walsh
Shares in Taylor Woodrow and George Wimpey soared today as the two companies announced a £6 billion merger that sees them leapfrog Barratt Developments and become Britain’s biggest housebuilder.

Taylor Woodrow leapt 17 per cent, or 71.5p to 492p to lead the FTSE 250 while Wimpey rose 7 per cent, or 49p to 684p.

They were followed by a number of rival housebuilders as analysts forecast the all-share deal would spark a fresh round of consolidation in the sector.

Redrow, previously a rumoured takeover target for both Taylor Woodrow and Wimpey, surged 8 per cent while shares in Bellway rose nearly 6 per cent.

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Confirmation of the Taylor Woodrow, George Wimpey tie-up follows a weekend of intense speculation.

The new company, to be called Taylor Wimpey, will have combined revenues of combined revenues of nearly £7 billion a year and average annual sales of 22,000 homes in the UK.

But up to 700 of the group’s 14,000 staff could go as the group looks to wring £70 million of cost savings from the deal. The majority of the cuts are expected in the UK.

While Taylor Woodrow shareholders will own 51 per cent of the combined business, to be created through a scheme of arrangement, Wimpey’s management will dominate the boardroom.

Peter Redfern, the Wimpey chief executive, will continue in the same role. Taylor Woodrow chief executive Ian Smith is expected to step down with a golden goodbye of £1.5 million after just three months in charge.

Mr Smith revealed talks between the two sides began six weeks ago, following the announcement of a strategic review at Taylor Woodrow when he joined in January.

“The culmination is the announcment we are talking about today.” he said. “It’s hugely disappointing to be leaving so quickly but I think this merger makes absolute sense and is a good deal for the company.”

Mr Redfern added: “We both feel we have genuinely looked at this as the best way both businesses had for creating shareholder value.

“I have to congratulate Ian and give him a huge amount of credit for behaving in the best interest of shareholders and putting this together as he did.”

In addition to the UK, both groups have a sizeable business in the US with a geographical overlap in Florida, California, Arizona and Texas.

Mr Smith said there were no plans to sell off Taylor Woodrow’s construction business.

Today’s deal follows a round of takeovers in the UK, with Persimmon landing Westbury and Barratt gobbling up Wilson Bowden.

Crest Nicholson recently sold out to a consortium including HBOS and Scottish tycoon Sir Tom Hunter.

Persimmon, which last year swallowed Westbury, is being tipped as a contender to gatecrash today’s merger by bidding for one of the companies. However, it may be put off by their exposure to the slowing American housing market.

One source said: “Both Taylor Woodrow and Wimpey have US businesses, which makes them a natural fit. By joining forces, they will be able to cut their costs in America. If Persimmon bids for one of them, it would probably have to spin the US business off.”

After today’s share price rise, the combined group’s market capitalisation is £5.6 billion. Including net debt, the enterprise value of the merged company would be about £6.4 billion.

Foundations

—Taylor Woodrow was founded in 1921 when 16-year-old Frank Taylor borrowed £100 to build two working-class homes in Blackpool. As he was too young to form his own company, his uncle Jack Woodrow lent his name to the business. It has operated in North America since 1936

—In 1880 George Wimpey established a stone-working business in Hammersmith, West London. In 1919 G. W. Mitchell purchased the company and expanded from road contracting into housebuilding. It acquired Morrison Homes in America in 1984