Shares
in
housebuilder
Crest
Nicholson
(CRST)
rose
nearly
10%
on
Friday
as
it
announced
it
had
rejected
a
£667
million
takeover
bid
from
larger
rival
Bellway
(BWY).
The
move
is
the
latest
sign
of
revived
M&A
activity
in
the
London
market,
which
has
seen
a
number
of
takeovers
and
bids.
FTSE
250
housebuilder
Bellway
announced
late
on
Thursday
that
it
had
made
a
bid
for
Crest
Nicholson,
which
earlier
in
the
day
had
revealed
a
half-year
loss
of
£30
million,
sending
shares
lower.
The
offer
had
been
made
on
April
25
and
revised
higher
on
May
7.
The
Crest
Nicholson
board
said
the
offer
significantly
undervalues
the
company,
even
though
the
deal
would
represent
a
near
20%
premium
to
the
price
before
the
approach.
For
Grant
Slade,
senior
equity
analyst
at
Morningstar,
Bellway
has
time
to
make
another
binding
offer.
The
potential
for
a
higher
offer
has
lifted
the
shares
on
Friday,
making
Crest
Nicholson
worth
just
under
£600
million;
against
Bellway’s
market
value
of
£3
billion.
Slade
thinks
Bellway
will
“sweeten”
the
deal
to
appease
Crest
Nicholson’s
board.
Bellway
shares
fell
on
Friday,
as
investors
anticipated
the
company
having
to
pay
more
to
acquire
Crest
Nicholson.
“While
sales
activity
on
Bellway’s
housing
sites
treaded
water
in
spring,
the
near-term
housing
market
outlook
is
improving.
Indeed,
a
number
of
leading
indicators
of
the
housing
market
—
including
house
prices
and
mortgage
approvals
—
are
trending
favourably
in
2024
year
to
date
and
point
to
a
housing
market
that
is
nearing
recovery,”
he
says.
“We
continue
to
anticipate
a
housing
market
revival
from
2025
onward
and
a
rewarding
decade
ahead
for
Bellway
—
and
its
major
UK
homebuilder
peers
—
as
a
growing
and
ageing
population
promotes
robust
demand
for
new
housing
in
the
UK
over
the
long
term.”
Despite
Slade’s
more
positive
outlook
for
the
UK
housing
market,
Crest
Nicholson
reported
a
£30.9
million
pretax
loss
in
its
half
year
results,
a
large
swing
from
the
£28.4
million
in
profit
it
reported
the
year
before.
Morningstar
Metrics
for
Bellway
• Fair
Value
Estimate: £26.34
• Morningstar
Rating:
★★★★
• Morningstar Economic
Moat
Rating:
None
• Morningstar
Uncertainty Rating:
High
Bellway
said
that
despite
the
rejection
of
its
proposal,
it
continues
to
believe
in
the
growth
opportunity
a
merger
could
provide.
Bellway
shares
fell
more
than
4%
on
Friday
to
£25.94m,
which
is
below
the
Morningstar
fair
value
estimate
for
the
stock.
“There
is
compelling
strategic
and
financial
rationale
for
a
combination
of
Bellway
and
Crest
Nicholson
which
would
bring
together
the
strength
of
each
business
with
complementary
brands
to
reinforce
Bellway’s
position
as
a
leading
UK
housebuilder.
“While
enabling
Crest
Nicholson
shareholders
to
benefit
from
the
scale
of
the
combined
business,
a
reduced
risk
profile,
lower
indebtedness
and
an
enhanced
landbank
to
capitalise
on
the
long-term
structural
growth
opportunity
in
the
UK
housing
market,”
Bellway’s
board
said
in
a
statement.
The
bid
is
the
latest
deal
in
the
UK
housebuilding
sector,
following
Barratt
Developments
(BDEV)
bid
for
Redrow
(RDW)
earlier
this
year,
as
the
sector
struggles
to
cope
with
the
industry
wide
downturn
triggered
by
high
interest
rates.
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