Recent troubles clouding Bovis Homes (BVS), namely profit warnings and the loss of its CEO, have hurt shares in the housebuilder and attracted two takeover bids. Its share price now rebounds by 7.6% to 891p on the news of M&A interest.

WHAT OFFERS ARE ON THE TABLE?

Both Galliford Try (GFRD) and Redrow (RDW) have made unsolicited merger offers.

Galliford Try is proposing an all share merger that would split the combined entity to 52.25% to Galliford Try shareholders and 47.75% to Bovis shareholders, implying a valuation of 0.56 Galliford shares for each Bovis share.

UBS calculates that, as of 10 March, the proposal would value Bovis at £1.2bn or 886p. This represents a 7% premium to the closing price.

Redrow, in turn has proposed £1.25 in cash and 1.32 new Redrow shares in exchange for each Bovis shares, in addition to 30p dividend. This represents 814p per Bovis share based on Redrow’s share price of 499p or in other words a slight discount of 2%.

WHAT HAPPENS NOW?

Bovis has rejected both proposals although talks are ongoing with Galliford.

UBS does not expect interest from elsewhere. ‘We believe bids from other homebuilders are unlikely based on current good returns on land purchase: because of that, larger homebuilders will likely focus on organic expansion through land acquisition.’

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Issue Date: 13 Mar 2017