City sources say firms have been discussing a deal for at least two weeks.
Housebuilder Berkeley Group is understood to be in talks with Taylor Woodrow with a view to launching a takeover or a merger.City sources say the firms’ management teams have been in discussions for at least two weeks.

A Taylor Woodrow spokesperson denied that discussions were taking place and Berkeley chief executive Tony Pidgley refused to comment.

If the deal is struck, analysts predict that it would lead to the disposal of Taylor Woodrow’s construction business. Speculation has surrounded Taylor Woodrow for several weeks since its share price fell from 192p last September to 128.5p by the end of trading this Tuesday.

All housebuilders’ shares have dropped over the same period, but analysts say Taywood’s management has been under more pressure than other companies’ to strike a deal.

The City was frustrated that the company has failed to find a buyer for materials arm Greenham Trading and that the company’s housing arm, Taywood Homes has been slow to follow the national trend to move upmarket.

Taywood is also understood to have had talks with contractor and housebuilder Alfred McAlpine, but sources say they are now over.

Berkeley is one of the UK’s most profitable housebuilders. Analysts say a deal would make good sense. One said: “A combined group would make savings and would be big enough to attractlarge pension funds. It would also have Taywood’s property development business and the dynamic management skills of Tony Pidgley.”

The two companies have combined sales of more than £2bn and a stock market value of about £1.08bn.

Berkeley has focused on mixed-use urban projects in recent years, and it acquired Chelsea Harbour for £59m this month. Taywood’s sizeable property portfolio, which includes St Katharine’s Dock in London, would be a useful acquisition.

  • On Wednesday, Malaysian firm Intria was believed to be close to finding a buyer for its 37.5% stake in Costain. The news led to a rise in Intria’s shares on Wednesday. Skanska, which owns 7.6% of Costain, has an option to buy 40% at a set price until November.