Domus plan ignites takeover frenzy

A last minute hostile bid by Taylor Woodrow has cast doubt on the planned merger of Bryant and Beazer. As Building Homes went to press it was still uncertain who would be joining forces with whom.

What began in December as the friendly merger of Bryant and Beazer this month turned into a feeding frenzy with Taylor Woodrow and Persimmon entering the fray. Taylor Woodrow, after being rebuffed by the Bryant board, announced a belated £520m hostile bid, forcing an eleventh hour adjournment of Bryant's extraordinary general meeting on 15 January called to vote on the friendly merger. Following Taylor Woodrow's announcement Persimmon declared an interest in mounting a takeover bid for Beazer if the merger with Bryant did not go ahead.

Bryant set homebuilding on course for consolidation with its announcement on 14 December that the country's third and ninth largest players were to merge to form a new housebuilding force to be known as Domus, promising the move would bring enhanced shareholder value, cost efficiencies and margin growth. Bryant has for some time been considered a candidate for merger, having already tried and failed to tie the knot with Alfred McAlpine.

Bryant Group's directors have resolutely spurned Taylor Woodrow's advances to date, rejecting a fourth bid on 15 January as Building Homes went to press. This is not expected to be Taylor Woodrow's final offer. Bryant is writing to shareholders to reinforce support for the merger and has rescheduled its EGM for 26 January.

Beazer remains committed to the friendly merger, with 77% of its shareholders having already given their backing. It is unlikely to welcome a bid from Persimmon as it turned down two approaches last year.

The industry's outburst of merger mania has been driven by the City, which has long been calling for homebuilders to consolidate with little recent success.

However, the desirability of consolidation has been questioned, notably by Fred Wellings' Private Housebuilding Annual 2000 report for Credit Lyonnais Securities Europe. "Unlike manufacturing, there are no operational economies of scale; there is no housebuilding equivalent of doubling the size of the chemical plant again and again and again to drive down costs. In contrast, there are diseconomies of scale," Wellings wrote.