Housebuilder Barratt is set to complete its acquisition of Redrow later this week, despite concerns raised by the UK's Competition and Markets Authority (CMA) regarding potential competition issues.
The £2.5 billion takeover had been subject to scrutiny by the CMA, which expressed concerns about the potential impact on competition in and around Whitchurch, Shropshire. The watchdog suggested the merger could lead to higher prices and reduced quality of homes in the area. However, the CMA did not raise any concerns about the merger on a national level.
Despite these concerns, Barratt has decided to proceed with the acquisition, temporarily setting aside the CMA's reservations. The company maintains that Whitchurch represents a small proportion of the combined company's operations, covering just one of over 400 areas where the two firms have overlapping presence.
Barratt has assured the CMA that both companies are working diligently to address the limited concerns raised in Whitchurch. This proactive approach aims to avoid further investigation by the regulator and secure approval for the merger.
Barratt expects the acquisition to be finalised following a court hearing scheduled for Wednesday. The company believes that this move will remove uncertainty for staff, suppliers and other stakeholders of both businesses.
However, the decision also anticipates the CMA to impose an enforcement order on Barratt and Redrow, prohibiting the integration of their operations until the regulator is satisfied that the competition concerns have been sufficiently addressed.
The two firms anticipate a complete merger within 18 months, with expected cost savings of at least £90 million per year materialising within three years. These savings are projected to be realised through streamlining operations and reducing redundancies, which could result in a 10% reduction in the combined workforce.
The merger is anticipated to incur a one-off cost of approximately £73 million for restructuring staff and offices. This move reflects Barratt's confidence in the long-term benefits of the acquisition, despite the immediate challenges associated with integration and the potential job losses.
