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Barratt and Redrow waive CMA approval to complete merger this week
Barratt and Redrow are expected to finalise their merger this week, despite ongoing work to address the concerns of the Competition and Markets Authority (CMA).
In a statement, Barratt said it would waive clearance from the CMA and complete the £2.5bn deal this week.
As a result, the CMA is expected to impose an initial enforcement order on both parties, preventing any action which might prejudice its investigation process.
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Shareholders approved Barratt’s proposed multibillion-pound merger with rival Redrow in May.
The combined group will have capacity to build “in excess” of 22,000 homes a year and is expected to bring in annual revenues of around £7.5bn, they said in a filing published earlier this year.
However, after the deal emerged, the CMA announced that it was looking into the potential acquisition over potential harm to the market, and launched a phase-one merger inquiry.
Earlier this month, the CMA revealed that the inquiry did not raise UK-wide competition issues, but that it did have concerns that the merger could lead to a lack of competition in one area around a Barratt development in Whitchurch, including nearby towns such as Nantwich, Ellesmere and Market Drayton.
The watchdog found that both house builders hold a high combined share of land in the catchment area and if the deal goes ahead, it could lead to higher house prices and lower-quality homes.
Barratt and Redrow have been asked to submit proposals that address the CMA’s concerns and to avoid the deal moving to an in-depth phase-two review.
On Monday 19 August, Barratt announced that the merger would be completed this week, despite clearance from the CMA being a condition of it.
In a stock market update, it said the completion would remove “uncertainty” for employees and supply chain and wider stakeholder groups of both businesses.
It said the completion would “allow us to accelerate the creation of an exceptional UK homebuilder in terms of quality, service and sustainability, which in turn can accelerate the delivery of high-quality, sustainable homes and communities for customers across the UK, addressing the country’s need for homes”.
It added: “In accordance with the CMA’s standard practice and following completion, Barratt and Redrow expect the CMA to impose an initial enforcement order [IEO] on the parties, preventing any action which might prejudice the CMA’s process.
“As a result of the IEO, whilst integration planning can continue, Barratt and Redrow would be prevented from integrating their two businesses, until the proposed undertakings have been agreed with the CMA or the CMA otherwise agrees to such actions taking place.”
Barratt said it intended to begin “full integration as soon as practicable and permissible”.
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