UK housebuilders Bovis Homes and Galliford Try have restarted discussions over a potential merger of their housing businesses, with Bovis planning to tap the capital markets for cash as part of the transaction.
The potential deal, the exact terms of which are still being hashed out, would value Galliford Try’s housing business at £1.075bn comprising a £300m cash payment and 0.57406 Bovis Homes shares per Galliford Try share held. It would see Bovis Homes merged with the Linden Homes and Partnerships and Regeneration divisions of Galliford Try.
Bovis would also take on Galliford Try’s 10-year debt of £100m.
Bovis plans to carry out an ABB of 9.99% of its share capital to partially fund the £300m cash consideration. A block trade that size could be worth around £143m based on the September 9 close, which put its market cap at £1.4bn. The remainder will be funded by taking out additional debt and existing resources.
Following the transaction, and taking into account the new shares issued under the placing and bonus issue, Galliford Try shareholders would own in aggregate around 29.3% of the enlarged Bovis Homes entity.
The transaction is subject to the placing going ahead, and approval by both companies’ shareholders. There are a number of other conditions including completion of due diligence, finalisation of the potential synergies and the transfer of pensions to Bovis Homes on terms acceptable to each party.
Bovis shares fell as much as 5% just after markets opened and the stock closed down 3.5% at £10.22. Galliford Try shares rallied and closed up 8% at 664p, after opening more than 26% above Monday’s close.
Galliford rejected a previous offer in May by Bovis to acquire its housebuilding arm, saying the deal undervalued the business division.
Lazard is financial adviser to Bovis together with Numis, which is also sole bookrunner and sole broker on the deal.