The competition watchdog is to investigate Barratt’s £2.5bn acquisition of rival housebuilder Redrow.
This morning, the Competition and Markets Authority (CMA) said it is: “considering whether it may be the case that this transaction, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002”.
“And, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.”
The CMA also said it is issuing a preliminary ‘invitation to comment’ to allow interested parties “to submit to the CMA any initial views on the impact that the transaction could have on competition in the UK.”
Barratt said at the time the deal would create the UK’s largest housebuilder and would help accelerate the “delivery of homes this country needs”.
However, the shock deal came shortly before the CMA published its review on the UK’s housebuilding sector, which hardly showered the industry with glory.
The competition regulator identified a number of issues with the market, including complex planning regulations holding back housebuilding, poor quality of homes constructed and high estate management charges during the year-long study.
The CMA also said it “found evidence” during the study, which indicated that some housebuilders may be sharing commercially sensitive information with their competitors. To that end, it launched a new review to investigate pricing practices in the sector.
An investigation has also been launched into some of the country’s biggest house builders, including Barratt, Bellway and Vistry.
The CMA said activity among housebuilders could be “influencing the build-out of sites and the prices of new homes.”
If formed, the ‘Barratt Redrow’ behemoth will have aggregate revenues of £7.45bn and build about 23,000 homes a year.
As part of the terms, Barrett’s shareholders will hold approximately 67.2 per cent of the combined group, whilst Redrow will account for the remaining 32.8 per cent.