Bellway boss dismisses Redrow merger talk as 'just press rubbish'

Merger talks between Bellway and Redrow, which would create the UK’s third-largest housebuilder, are “just press rubbish” insists John Watson, chief executive of Bellway.

Watson said: “I’m too busy trying to get sales. That stuff’s not coming from me.”

The last time there was serious speculation that these two might become one was back in 2005, and nothing happened that time round.

The view in the city is that an all-share merger would be one way of taking an opportunity in the crash in value of shares of all housebuilders, as none of the major “hawks” are likely to launch a hostile all-cash offer in the present climate.

Synergies would be expected to run to £40m-£50m a year given the experience of the three recent mega-deals in the housebuilding sector.

Rumoured bidders for Redrow in recent times have included Barratt, Bovis and Bellway.

Mark Hughes, analyst with stockbroker Panmure Gordon, said Bellway is a pretty lean business and is “operating as well as anyone”.

“A nil-premium merger would be a way for Redrow to say that it still exists. In reality, it would be a quasi-takeover by Bellway.

“It would be the lesser of two evils for Redrow as it would combine forces with another overweight-in-the-north rival and that’s better that than being swallowed by a big hitter and then feeling to have been shut down.

“In a Redrow-Bellway deal, a bigger percentage of Redrow’s senior managers and landbuyers would envisage staying in their jobs as the merger process would involve taking the best our of each division where there was overlap.”

But if Watson devotes all his energies to keeping Bellway’s existing plates in the air, what might happen next at Redrow?

The view is that it would remain safe for at least another six months, though that might then result in a less-than-friendly move, most likely from either Bank of Scotland or Persimmon.