Barratt initially announced its intention to complete the £2.5bn merger with Redrow, waiving a Competitions & Markets Authority (CMA) condition to do so, but the latest update from the CMA indicates they will allow the full merger to go ahead
The Barratt-Redrow merger looks set to go ahead without intervention from the CMA, after the market authority’s latest statement suggests that they will accept the company’s solutions to local competition concerns in Shropshire.
In a statement released today(21 August 2024), the CMA stated:
“The CMA considers that there are reasonable grounds for believing that the undertakings offered by the Parties or a modified version of them, might be accepted by the CMA under the Enterprise Act 2002.
“The CMA will publish the full text of the decision shortly.”
Barratt and Redrow announced their intent to continue with the deal earlier this week
Speaking to the London Stock Exchange earlier on Monday 19 August, Barratt confirmed that it had waived a CMA approval condition to go ahead with the merger with Redrow.
The company will continue to work with the CMA on outstanding queries around competition in Whitchurch, Shropshire, where the high presence of Barratt and Redrow developments in an 11-mile area has raised concerns that housebuyers may face higher prices or lower quality homes.
The CMA does not have any competition concerns regarding the merger on a national scale. The deal, which Barratt intends to complete within the next 18 months, would consolidate Barratt’s position as the UK’s largest housebuilder, with an estimated turnover of over £7bn.
Barratt and Redrow want to agree “suitable undertakings” with the CMA
Arguing that Whitchurch is just one of over 400 areas where Barratt and Redrow overlap, the two firms are reportedly working on solutions to address the CMA’s concerns.
Both housebuilders expressed a desire to agree “suitable undertakings” to prevent a phase two investigation from the CMA, which could halt the merger.
A Barratt spokesperson commented that waiving the CMA condition: “removes uncertainty for the employees, supply chain and wider stakeholder groups of both businesses, and allows 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.”
The Barratt-Redrow merger is expected to yield cost savings of around £90m a year after three years, partly achieved by a restructuring of staff and offices. This is estimated to lead to around 10% of jobs being lost across the combined business.
CMA approval is still needed for parts of the merger
Decisions such as changing the name to Barratt Redrow, appointing Matthew Pratt to the combined group board as well as non-executive directors Nicky Dulieu and Geeta Nanda, will require the approval of the CMA before the merger can complete.
Barratt anticipated the CMA to impose an enforcement order on both Barratt and Redrow to enforce this, which it did on Tuesday 20 August.
The CMA said on the enforcement order: “The Competition and Markets Authority has reasonable grounds to believe that the parties will complete the Merger following a court sanctioning hearing. It has, therefore, served an initial enforcement order under section 72(2) of the Enterprise Act 2002 on Barratt Developments, plc in relation to the acquisition by Barratt Developments, plc of Redrow plc. The initial enforcement order will take effect upon completion of the Merger.”
