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.
