In a significant development for the UK housing market, Barratt Developments and Redrow have reached a critical milestone in their proposed £2.5 billion all-share merger. The United Kingdom’s Competition and Markets Authority (CMA) has completed its Phase 1 investigation into the transaction, largely clearing it on a national level but raising concerns in a specific local area. The merger, which has been in the works since February 2024, aims to create the UK’s largest homebuilder, producing approximately 23,000 homes annually with combined revenues exceeding £7 billion.

CMA Findings and Waiver of Conditions

The CMA’s investigation found no widespread competition issues but identified a potential problem in Whitchurch, Shropshire, where both companies have significant developments. The concern is that the merger could lead to higher prices and lower-quality homes for buyers in this area due to reduced competition. Despite this, Barratt has decided to waive the CMA Condition outlined in the Scheme Document, signaling its determination to move forward with the merger, known as the “Combination.” This waiver effectively removes a significant barrier, allowing the companies to proceed with the merger’s completion, expected later this week.

Barratt and Redrow have proposed undertakings focused on the future conduct of sales, rather than land disposals, to address the CMA’s concerns and avoid a more in-depth Phase 2 investigation. This proactive approach reflects the companies’ commitment to resolving the issue without delaying the merger.

Strategic Plans and Regulatory Scrutiny

Upon completion of the merger, the CMA is expected to impose an Initial Enforcement Order (IEO) to prevent any actions that might prejudice its ongoing review. This order will restrict Barratt and Redrow from fully integrating their operations until the competition concerns are adequately addressed. However, this will not prevent the companies from continuing their integration planning, with full integration anticipated to be completed within 18 months post-merger. The merger’s strategic plans, including key leadership appointments and the rebranding of the merged entity to “Barratt Redrow plc,” will proceed once regulatory clearance is obtained.

The strategic appointments include Matthew Pratt as the Chief Executive Officer of Redrow, Nicky Dulieu, and Geeta Nanda as Non-Executive Directors, and Barbara Richmond as the Chief Financial Officer and Group Integration and Synergies Director. Redrow’s brand will be preserved as a premium offering within the combined group’s portfolio, alongside Barratt Homes and David Wilson Homes.

Next Steps and Broader Context

The next critical step in the merger process is the Court Sanction Hearing, scheduled for 20 August 2024, where Redrow will seek court approval for the Scheme. This hearing is expected to pave the way for the final completion of the merger, which would create a formidable force in the UK homebuilding sector, poised to deliver high-quality, sustainable homes across the nation.

This merger comes amid the CMA’s broader scrutiny of the UK housebuilding sector, including an ongoing investigation into allegations that several major housebuilders, including Barratt and Redrow, shared sensitive information that could impact competition. This investigation underscores the regulatory environment’s heightened vigilance, reflecting the complexities and challenges facing the industry.

By proceeding with the merger, Barratt and Redrow aim to create an exceptional homebuilder that excels in quality, service, and sustainability, ultimately addressing the UK’s pressing housing needs​.

  Barratt Developments, Barratt Redrow plc, CMA Investigation, Court Sanction Hearing, Merger and Acquisition, Redrow, UK Homebuilders, UK Housing Market