Bovis bid battle: Will the winner be happy?
Galliford Try and Redrow are battling to buy the company, which is in play because it made a mess of things
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Your support makes all the difference.The housebuilding sector’s problem child has found not one, but two rivals willing to give it a new home.
Good news for Bovis shareholders Their investments have been becalmed at a time when rivals have been racing fancy yachts.
Good news for the City. There isn’t much better than a bid battle when it comes to generating fees for bankers, lawyers, accountants, PR agencies and other assorted hangers on.
But what about the bidders? That remains to be seen.
Galliford Try, the sixth biggest UK house builder, is in the box seat right now. Its initial all-share based proposal was rejected but the two are still playing footsie. Or should that be FTSE. As in 100. A place in the big boys index would be the medium term aim of a merger, you would think, although they’d have some more growing to do first.
Redrow would get there rather sooner if it won, but it’s on the outside looking in, having come up short with its own proposal involving cash and shares.
It would still like to do a deal, but while its bosses will knock their rival to whoever cares to listen, it’s going to take more than that.
Bovis shareholders would get nearly half the business after a merger with Galliford, depending on what emerges from the current talks. It would probably make a more comfortable home for the top people too. Redrow's founder and chairman Steve Morgan recently made headlines with a £200m charitable donation. You don't make the sort of fortune to enable that by tolerating second rate.
Of course, shareholders interests absolutely, positively, come first. And that’s the only thing Bovis bosses are thinking of right now.
Joking aside, whoever wins is not only going to have to sort out a merger. They’re going to have to sort out a mess. Just last month Bovis set £7m aside to compensate customers who were sold houses that were unfinished and had faults (electrical, plumbing, you know the drill).
Ambitious growth strategies are all very well, but if you forget about the details and muck things up for your customers along the way they’ll quickly unravel.
Bovis, which is currently without a permanent chief executive and is being led by finance director Earl Sibley in the meantime, won’t be restoring profitability if it continues to sacrifice those that buy its homes on that altar.
There’s a Facebook group devoted to Bovis Moans (@BovisMoans in case you were interested). It doesn’t make for happy reading.
If either one of Redrow or Galliford Try formalises their interest by turning a proposal into a bid, they’ll talk about cost savings, and growth, because that’s what the City’s institutional investors like to hear. But they’ll find it’s their name in front of “moans” and the merger going south if they forget the people that buy their homes.
It’s possible to win a bid battle by losing.
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