Barratt Developments PLC (LSE:BDEV) on Wednesday agreed a £2.52 billion takeover of fellow housebuilder Redrow PLC (LSE:RDW).
The all-share deal will see Redrow shareholders receive 1.44 Barratt shares for every one held in Redrow.
In a statement, the companies said this would represent a premium of 27% to Redrow’s closing share price on Tuesday.
On completion, Redrow shareholders will hold around 33% of the combined group and Barratt shareholders around 67%.
The firms described the deal as a “uniquely compelling opportunity” to “create an exceptional UK homebuilder”.
Barratt believes the combined group can achieve annual pre-tax cost synergies of at least £90 million by the end of the third year following completion, of which around 90% is expected to be delivered by the end of the second year.
One-off costs of delivering these savings are expected to total around £73 million.
The combination is expected to be accretive to Barratt and Redrow's respective adjusted earnings per share in the first year after completion.
Redrow’s founder Steve Morgan has backed the deal.
The news came as Barratt unveiled half-year results which showed a 33.5% drop in revenue to £1.85 billion from £2.78 billion.
Completions fell 28.5% to 6,171 and adjusted pre-tax profit tumbled 69.9% to £157.1 million.
The dividend was slashed to 4.4p from 10.2p.