London-listed housebuilder Bellway has announced it will not make a firm offer to buy rival Crest Nicholson with the company stating that its “strong balance sheet” and land bank would be sufficient to fuel growth independently.
Following the announcement Crest Nicholson’s shares slumped by just over 16 per cent to 221p per share.
Bellway first bid to take over the Surrey-headquartered developer in June, making an all-share offer valuing the company at £667m – 253p per share – representing a 17 per cent premium to its closing price that day. Crest rejected the offer on the basis that it “significantly undervalued” the company.
The bid came shortly after Crest issued its fourth profit warning since August, projecting an underlying pre-tax profit of £22m to £29m for the year—well below analysts’ expectations of £39m.
A month later Newcastle-headquartered Bellway revised its offer, valuing the firm at £720m – a £70m improvement on its initial bid – which Crest Nicholson was set to unanimously accept.
Under the revised terms, Crest shareholders would have been in line to receive just under 0.01 shares in Bellway for each Crest share they own, on top of a dividend of four pence per Crest share.
Following the offer Bellway was given until August 8, 2024, to set out its firm intention to make an offer. The company was granted an extension for this deadline until August 20, 2024.
But today Bellway said in a statement: “Further to the previous announcements made by Bellway and Crest Nicholson regarding a possible offer for Crest Nicholson, Bellway confirms that it does not intend to make a firm offer for Crest Nicholson.
“As noted in its trading update released on August 9, 2024, Bellway remains confident that its robust balance sheet and operational strength, combined with the depth and quality of its land bank, will enable Bellway to deliver volume growth in the years ahead and support ongoing value creation for shareholders.”
In a statement, Crest Nicholson added: “As previously announced, the board of Crest Nicholson had engaged with Bellway in relation to a possible all-share offer for Crest Nicholson in response to a series of unsolicited proposals from Bellway.
“As outlined in its half-year results on June 13 for the period ended April 30, Crest Nicholson remains confident in its standalone prospects, in particular given conclusion of the review of provisions for completed development sites supported by external consultants, its highly attractive land portfolio and the new leadership of Martyn Clark.”
Last week the company issued a trading update for the 12 months ending July 30, 2024, which revealed its revenue had decreased less than expected.
During the period the housebuilder brought in revenue of £2.3bn in the year ending July 30, 2024, down from just under £3.4bn in the 12 months before.
Revenue fell as the number of homes built and sold during in the period dropped from 7,654 compared to 10,945 in the year prior.
Its average selling price also declined from £310,306 to £308,000, although Bellway said this figure was “slightly ahead of guidance”.
The company added that its forward order book stood at 5,144 homes compared with 4,411 in the year before, with a value of £1.4bn, up from £1.2bn in the 12 months prior.
‘Crest’s shares were crest fallen’
Anthony Codling, managing director at RBC Capital Markets, said the move by Bellway would deal a blow to Crest’s recovery efforts.
He said: “Crest’s shares were crest fallen as Bellway decided to shut up rather than put up, deciding not to proceed with a bid to buy the company.
“Without a bid on the table we suspect that the path to recovery will be a long and winding road ahead for Crest’s long suffering shareholders, but no doubt in coming CEO Martyn Clark will be glad he will get a chance to make his mark.
“Meanwhile, Bellway’s shares bounced on the news that it was no longer bidding for Crest, as we said last week: Bellway’s engine is firing on all cylinders, so we question whether it needs to buy the misfiring Crest Nicholson – if it ain’t broke, don’t fix it, and it seems Bellway have decided it ain’t broke, there is nothing to fix, so no need to buy Crest. “