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On February 7, 2024, Barratt Developments Plc (LSE:BDEV) and Redrow Plc ("Redrow") announced that they had reached an agreement on the terms of an all-share offer, resulting in the combination of both companies. This merger, which involves Barratt acquiring the entire issued and to be issued share capital of Redrow, is set to be implemented through a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006 (the "Scheme"). The full terms and conditions of the merger were detailed in a scheme document published on April 19, 2024.
Shareholder Approval
On May 15, 2024, both companies announced that the required shareholder approvals had been obtained. Redrow's shareholders approved the necessary resolutions at both the Court Meeting and the General Meeting. Simultaneously, Barratt's shareholders also approved the resolution relating to the merger at its General Meeting.
CMA Phase 1 Investigation
The United Kingdom's Competition and Markets Authority (CMA) initiated a Phase 1 investigation on June 13, 2024, to assess the potential competition impacts of the merger. Today, the CMA concluded the primary portion of this investigation. The CMA's findings indicated that the merger does not generally pose competition issues across the vast majority of the 400+ local areas where Barratt and Redrow have overlapping operations. However, the CMA raised concerns regarding competition in the supply of new build private residential housing in one specific local area.
CMA Concerns and Proposed Undertakings
The competition concern identified by the CMA relates to a geographic area centered around Whitchurch, Shropshire. This area contains four Barratt developments and a nearly completed Redrow development with fewer than 10 plots remaining for sale. To address the CMA's concerns, Barratt and Redrow are preparing to offer undertakings that will focus on the future conduct of sales and construction activities at the Redrow site. Importantly, the companies do not anticipate or propose any land disposals as part of these undertakings.
Pursuant to the Enterprise Act 2002, Barratt and Redrow have until August 15, 2024, to propose these undertakings to the CMA. The statutory deadline for the CMA to determine whether these undertakings are acceptable in principle is August 22, 2024.
Next Steps and Timeline
Barratt and Redrow are working collaboratively to ensure that the merger proceeds smoothly and becomes effective in the second half of 2024, as outlined in the Scheme Document. The companies remain optimistic that the CMA will accept their proposed undertakings, thereby avoiding the need for a Phase 2 investigation. Further updates will be provided as the situation develops.
