In major news on UK stocks, Barratt Developments PLC’s (GB:BDEV) acquisition of its rival Redrow PLC (GB:RDW) has come under the regulatory scrutiny of a UK watchdog. The CMA (competition and markets authority) is currently gathering initial opinions on the deal’s impact on competition in the UK and has not yet started a formal investigation. It is mainly concerned with the possibility that the merger could lead to a significant reduction in competition. The CMA has until April 2 to decide on initiating a formal investigation.
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BDEV stock is trading down by 0.36%, while RDW is up by 0.075% at the time of writing today.
Barratt Developments and Redrow are among the leading housebuilders in the UK, specializing in residential property development.
Synergy from the Deal
Barratt proposed an all-stock deal to acquire Redrow for £2.52 billion in February. Both the companies expressed confidence in the deal, stating it as an exceptional opportunity to establish a highly compelling UK homebuilder. Moreover, with this deal, Barratt was aiming to capitalize on a nascent recovery in the housing market and solidify its position as a leading homebuilder.
During 2023, the UK’s housing market encountered difficulties due to sluggish demand, leading to reduced profits for homebuilders amid high borrowing expenses. However, there have been indications of stability since the beginning of this year.
Post-deal closure, a newly formed entity will operate under the name Barratt Redrow PLC, of which 67.2% will be held by Barratt shareholders. The combined firm boasts a projected turnover exceeding £7 billion and is expected to build more than 20,600 homes in a year. Barratt anticipates that the acquisition will enhance earnings within the first year post-completion and generate £90 million in annual cost savings by the end of the third year.
What is the Target Price for Barratt?
On TipRanks, BDEV stock has been assigned a Hold consensus rating based on one Buy, seven Holds, and one Sell recommendation. The Barratt share price target is 522.2p, which is 16% above the current level.
