UK housebuilders Barratt Developments plc (LON:BDEV) and Redrow plc (LON:RDW) are planning to proceed with their £2.5bn merger despite issues raised by the competition regulator.
The Competition and Markets Authority (CMA) said earlier this month that it had identified competition concerns in one area of the country, with both housebuilders currently holding a high combined share of land around a Barratt development in Whitchurch, Shropshire.
As a result, the regulator said that if the merger goes ahead it could lead to higher prices and lower quality homes for homebuyers in this area, which includes nearby towns such as Nantwich, Ellesmere and Market Drayton.
Barratt and Redrow were invited to submit proposals which address the CMA’s concerns in the Whitchurch area, to avoid the deal moving to an in-depth competition review.
On Monday morning, Barratt announced that it had waived the CMA clearance condition which had been part of the deal and the two companies’ boards of directors have agreed to complete the merger later this week.
Barratt added that, along with Redrow, it is “continuing to engage with the CMA with the objective of agreeing suitable undertakings” in order to address the concerns raised and avoid the need for a full investigation.
Russ Mould from investment firm AJ Bell, quoted by Sky News, said: “An enforcement order from the regulator is likely but Barratt and Redrow are ready for it and will presumably do what’s necessary to prevent the probe going any further.”
He added: “Speculation could now build over whether either of Barratt’s main rivals — Taylor Wimpey and Persimmon — might pursue their own deal in response.”
