Housebuilding giant Barratt Developments looks set to clear a potential obstacle to its planned £2.5 billion takeover of rival Redrow after the competition regulator signalled it would clear the deal.
The Competition and Markets Authority said there were reasonable grounds to believe that undertakings given by the firms would address concerns it had voiced about the takeover.
The CMA has still to deliver a formal verdict. However, following yesterday’s statement it seems unlikely that the authority would try to force Barratt to cancel or amend the takeover.
The business created through the deal, which will be called Barratt Redrow, will be the UK’s biggest housebuilder. Barratt has a significant presence in Scotland. Redrow is focused on England and Wales.
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On Monday Barratt said it expected to complete the deal this week. It noted then that following the CMA’s first phase investigation the regulator had said the deal did not raise any UK-wide competition concerns.
The CMA said the only issues found related to the area around a Barratt development in Whitchurch, Shropshire.
It noted that the business created through the takeover would continue to face competition from rivals nationally and in all other overlapping local areas.
However, the regulator cautioned: “While this deal did not raise UK-wide competition concerns, the CMA is aware there may be further consolidation amongst housebuilders in the UK and is committed to carefully assessing mergers in the housebuilding market further, both on a national and local level.”
The Barratt Redrow deal will continue a process in which a range of housebuilders fhave acquired rivals in the expectation that they will be able to use increases in scale to boost their profitability.
Another big deal could be on the cards. In June pensions giant Legal & General raised the prospect it could sell the Cala housebuilding operation, which is a major player in the Scottish market. Cala developed out of the City of Aberdeen Land Association.
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In a report on the housing market published in February the CMA said: “The housebuilding market is not delivering well for consumers and has consistently failed to do so over successive decades.”
Noting that too few houses are being built the CMA added: “We have found that the profitability of the 11 largest housebuilders has been generally higher than we would expect in a well-functioning market.”
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