Housebuilder enters talks with Redrow after Country & Metropolitan fails to pull off takeover.
Housebuilder Redrow Homes was this week poised to make a £30m takeover offer for smaller rival Tay Homes.

Tay announced on Tuesday that it was in takeover talks but refused to identify its suitor. City sources have confirmed that the company is north-west England-based Redrow. Tay said the indicative offer was for 110p a share. The firm's shares leaped 20p to 104p after the announcement.

Tay is likely to accept the offer. Redrow refused to comment.

A source said: "Redrow is big enough to make this sort of offer and it is a good fit."

Tay is an attractive target for Redrow because it has a healthy landbank in north-east England and Scotland, but only has margins of about 5%. The source added: "Redrow, or whoever gets them, has margins of 15% and will be confident of making more from the business – and that will undoubtedly mean the present management will go."

They’ve done all the donkey-work and now one of the big boys has moved in with the cash offer

Source on Country & Metropolitan’s failed bid for Tay Homes

Leeds-based Tay made a pre-tax profit of £3.4m in the year to 30 June on turnover of £81.8m. It sold about 800 homes.

Tay was targeted by Country & Metropolitan earlier this year. That move failed because the housebuilder could not raise enough cash to increase its bid. It has a market capitalisation of £9m and is less than half the size of Tay; Redrow has a market capitalisation of £450m.

A source close to Country & Metropolitan said: "They wanted the company but couldn't do it. They've done all the donkey-work and now one of the big boys has moved in with the cash offer. Country & Met will be disappointed but you could say they'll be crying all the way to the bank."

Country & Metropolitan owns 26.5% of Tay, and will make a £1m profit on the sale of its stake, which it bought this year for £7.8m, or less than 110p a share.