UK Edition
Galliford Try abandons plans for takeover of rival housebuilder Bovis
Galliford Try has walked away from its pursuit of Bovis Homes, as the beleagured housebuilder snapped up its suitor’s former chief executive for itself.
Bovis has appointed former Galliford boss Greg Fitzgerald to the top job, which has been vacant since David Ritchie quit in January after a shock profit warning, reports of a slowdown in the rate of building and sales, and faults in homes.
Galliford had remained in talks with Bovis after its £1.2bn approach was first rejected last month, saying convesations were “largely constructive”. But today it said it had abandoned plans for a tie-up after it was unable to "secure the support of the board of Bovis on terms that represent the best interests of Galliford Try shareholders".
It comes a week after fellow suitor Redrow abandoned talks with Bovis, saying it would not table a higher offer than its £1bn bid.
While both house builders are now out of the running, that may not be the end of takeover talk, according to Robin Hardy at Shore Capital. He said: “There have been suggestions that an offer could come from outside the industry and while that is a long shot, it is possible and many observers will still view Bovis as being ‘in play’.”
But Anthony Codling, an analyst at Jefferies, said that the takeover offers were tabled because Bovis was in “a special situation” as a company without a chief executive and with operational issues.
“One of the potential quick fixes was, rather than get new management in, why not have it purchased,” he said, adding that M&A in the house building sector was unusual in this period in the cycle as land is readily available at appropriate prices, and a good landbank such as that of Bovis was not necessarily worth paying a premium for.
Bovis was rocked by customer complaints over the poor quality of its homes, which were sold unfinished and were plagued by electrical and plumbing faults. The firm announced in February that annual pre-tax profits fell 3pc to £154.7m, as it set aside £7m to cover remedial work and compensation for affected customers and revealed a raft of measures to improve the service.
Mr Fitzgerald will now undertake a structural and strategic review to overhaul the company. He spent more than 30 years of his career at Galliford, latterly as chief executive and chairman.
Ian Tyler, chairman of Bovis, said: “He is an excellent, experienced, energetic chief executive, and there is a great amount that leadership he will bring to the group. He is going to be a very good thing for the company.”
Bovis’s share price climbed 4.68pc on the news, tempered by the fact that takeover talks have come to a close, said Mr Codling. He added: “The success of Galliford Try over the last 10 years is down to [Mr Fitzgerald]. He turned it into a major UK housebuilder, and he has a very good track record of delivery. He will bring no nonsense, and shake things up at Bovis - he doesn’t suffer fools gladly. If changes need to be made to personnel, he will make them.”
Mr Codling compared him to Tony Pidgley, the chairman of Berkeley Homes, and said that he would bring “ruthless efficiency” to the company. “During the downturn he generated loads of cash at Galliford Try because he was the first to act with a construction mindset as house builders watched. He was the first person back in the land market.”
During his time at the helm, Galliford's share price increased by 200pc.
Mr Hardy of Shore Capital was less positive about the move. “This is an interesting appointment but is it strong enough to beat the value that might have arisen from a bid or merger? We don’t think so.”
In a trading update Bovis said sales and reservations were in line with the board's expectations.
Mr Fitzgerald will take on the top job at Bovis on April 18 on a £650,000 annual salary.