City approves of proposed Taylor Wimpey merger but analyst anticpate rival offer
The City gave its approval to the proposed merger between Taylor Woodrow and Wimpey as shares rose in both companies after they announced a possible deal to create a £5bn mega housebuilder and the biggest in the UK.
Analysts said that a merger between the two had long been expected because it made strategic sense as the two companies both have a housebuilding business in the US.
However, shares in Taylor Woodrow rose by 13% to 475p yesterday, more than Wimpey, because of widespread speculation that Persimmon is planning to throw its hat into the ring by making an offer for Taylor Woodrow.
One senior City source said: “It is likely Persimmon will come in, leaving Wimpey naked.”
However, a deal between Taylor Woodrow and Wimpey was considered better than no deal.
Analyst David Taylor said: “Although not quite as attractive to shareholders as an outright bid we believe it will be more beneficial in the medium term to be part of a combined group than to try to transform underperforming businesses separately.”
The proposed merger would see Taylor Woodrow shareholders owning 21% of the combined equity and Wimpey remaining 49%.
Wimpey chief executive would become chief executive of the combined business. Ian Smith, Taylor Woodrow’s recently appointed chief executive, would leave.
A spokesperson for Taylor Woodrow declined to comment on the speculation about Persimmon.