It is the merger that has been tipped, on and off, for the best part of a decade, but few would have thought that a £5bn deal between Taylor Woodrow and Wimpey to create the UK’s largest housebuilder would finally be hatched in a “dingy roadside cafe on the M40”.
Yet that is exactly what happened, according to Ian Smith, Taylor Woodrow’s chief executive, who together with Peter Redfern, Wimpey chief executive, outlined the details of the proposed merger on Monday.
As Building went to press, shares in Taylor Woodrow were still rising, amid speculation that Persimmon was ready to make a counter offer for it. This would “leave Wimpey naked”, according to one City source.
There was no announcement of an offer from Persimmon, and neither it nor Taywood would comment.
Should the “Taylor Wimpey” merger go through, Redfern would become chief executive, while Smith, who has only been at the helm of Taylor Woodrow since January, is understood to be leaving with a £1.5m payoff.
Smith said: “I could well have seen myself working out to retirement in this job, but this made sense for the business.” He added: “We had lower end margins and investor impatience.”
Neither company has been performing well compared with other UK housebuilders because of the downturn in the US market.
Five per cent of staff are expected to lose their jobs.
It has not been confirmed whether the head office would be located at Taywood’s base in Solihull, in the West Midlands, or Wimpey’s at High Wycombe in Buckinghamshire.
Taylor Wimpey, would be by far the biggest UK housebuilder with a £6.7bn turnover and unit completions of more than 30,000 a year, 22,000 of which would be in the UK and the rest in the US. It has always been seen as a likely partnership because both have large US interests.
Redfern said: “We would look to increase profit margins from 13% to 18% within five years.”
A merger would see Barratt knocked into second place in terms of turnover and UK completions, even after its takeover of Wilson Bowden, which is due for completion next month. Persimmon, the only housebuilder in the FTSE 100, would be third.
However, in terms of landbanks, neither Taywood nor Wimpey are strong. The merged company would fall behind both Barratt and Persimmon with 92,000 plots compared with 103,550 and 94,655 respectively.
Taywood’s logo of four men hauling on a rope, the best recognised in the industry, will be retained by the construction business and Bryant Homes.
Top 10 housebuilders
By annual completions:
Taylor Wimpey 31,000*
Barratt/Wilson Bowden 19,808
Miller Group 3,960
Bovis Homes 3,123
Galliford Try 3,000
Crest Nicholson 2,946
* 22,000 in the UK, 9,000 in the US