A £2.5bn merger between homebuilders Barratt and Redrow has got the go-ahead from regulators.
Barratt initially agreed a deal to buy Redrow in February, arguing that the merger would enable them to make £90m in cost savings and drive supply chain innovation.
But the Competition and Markets Authority (CMA) launched an investigation into the planned merger in March, over concerns that it could “result in a substantial lessening of competition (SLC)”.
On Monday (7 October), the two firms announced they had merged into one business, called Barratt Redrow after the CMA found last week that the two firms had agreed ways to “remedy, mitigate or prevent the substantial lessening of competition” within the sector.
The CMA said assurances around local competition in Shropshire and Cheshire meant it would not be moving its probe into a phase two investigation, clearing the deal to proceed.
David Thomas, former chief executive at Barratt Developments, has been appointed as Barratt Redrow’s new chief executive, while Redrow chief executive Matthew Pratt has also joined the board.
In a statement, Thomas said it was a “significant milestone” for the two firms as they come together as one.
“With this combination, we have created an exceptional housebuilder in terms of quality, service and sustainability, able to accelerate the delivery of the homes this country needs,” he added.
“Together, we offer a broader range of homes and price points for our customers, who we will continue to put at the heart of everything we do.”
Earlier this year, a joint agreement between the two firms set out the business case for the deal. It said that “the combined group’s supply chains will benefit from greater visibility and certainty of delivery and the acceleration of development through the deployment of brands on Barratt and Redrow’s respective sites and land pipelines.
“This should give subcontractors confidence to invest in developing the skilled labour pool and production facilities which are so important to the future of the sector.”
The CMA decision focused on the authority’s concerns that a Barratt project in Whitchurch in Shropshire was too close to a 324-home project run by Redrow in Nantwich, Cheshire.
The authority voiced concerns that a merger could mean “higher prices and lower quality homes for homebuyers” in the area.
But it accepted the suggestion by Barratt and Redrow to appoint Savills to manage the sale of the rest of the houses on the plot belonging to Redrow, to ensure that the homes are “constructed to Redrow’s quality standards”. Savills will also monitor the site to ensure construction is completed on time.
Newly formed Barratt Redrow will also appoint a monitoring trustee and an independent professional quantity surveyor – to be approved by the CMA – to oversee the two developments.
The CMA accepted these terms. In its decision, the CMA said the suggestions made by Barratt and Redrow were “as comprehensive a solution as is reasonable and practicable”.
“[They] remedy, mitigate or prevent the SLC identified […] and any adverse effects resulting from it,” it added.
