LONDON (Reuters) - British housebuilder Galliford Try (GFRD.L) on Wednesday pulled out of a 1.2 billion pound ($1.5 billion) attempt to buy rival Bovis (BVS.L) after the two failed to agree on price, leaving Bovis to pursue a turnaround under a new chief executive.
Bovis, whose previous chief quit in January after a profit warning resulting from a failure to build enough homes on time, named former Galliford chief Greg Fitzgerald as CEO and said it could deliver more for shareholders as an independent company.
Bovis had been subject to takeover speculation since a major shareholder wrote to another builder suggesting a tie-up earlier this year.
The company rejected offers from Redrow (RDW.L) and Galliford last month. It said on Wednesday talks with the latter had failed to reach agreement.
“The merger proposal ... failed to reflect the underlying value of the Bovis business,” Bovis said in a statement. “The board ... believes that an independent strategy under the leadership of Greg Fitzgerald will deliver greater value for shareholders.”
Fitzgerald spent more than 30 years of his career at Galliford and was CEO until the end of September 2015, subsequently becoming its chairman. He will join Bovis on April 18 to lead a turnaround of the group, which said its current sales and reservations were in line with expectations.
Fitzgerald faces the task of fixing a builder whose profits fell in 2016 and whose volumes are expected to drop by between 10 and 15 percent this year, despite many peers posting bumper results and rising sales in a buoyant market.
Brokerage Liberum said it was disappointing the bid had failed but noted Fitzgerald’s appointment was positive. “He is very well regarded,” said analyst Charlie Campbell.
Bovis has been subject to negative media coverage in Britain after some buyers complained about the quality of its homes, citing issues ranging from a lack of sealant in bathrooms to the heads of nails poking through walls.
Shares in Bovis rose nearly 3 percent in early trading, but remain the worst performing of any major builder since the Brexit vote in June, which sent British construction stocks down by up to 40 percent.
A tie-up between Bovis and Galliford Try would have created Britain’s fifth-largest housebuilder by volume and would have been the sector’s first major consolidation in nearly a decade.
Many executives in the industry remain cautious about their businesses after several builders had entered the 2008 financial crisis and subsequent recession with high levels of debt, leading many to shut or taken over.
Galliford had offered 1.19 billion pounds for Bovis, or 886 pence per share, and envisaged an equity split of 52.25 percent for Galliford shareholders and 47.75 percent for Bovis’s owners.
($1 = 0.8040 pounds)
Editing by Paul Sandle and David Holmes