Redrow PLC (LSE:RDW) shares surged 12% following the announcement of the housebuilder's £2.5 billion all-share acquisition by Barratt Developments PLC (LSE:BDEV), with the latter saying it brought together two "highly complementary companies".
The deal offers Redrow investors a 27.2% premium on their shares, granting them 1.44 new Barratt shares for each Redrow share, resulting in a near one-third ownership of the newly formed Barratt Redrow.
This strategic move, which is expected to generated £90 milllion in annual synergies, is aimed at creating a UK homebuilder capable of overcoming market challenges, including last year's house price pressures.
The merger comes as the housing market shows signs of recovery, with Barratt noting early improvements in reservation rates and buyer sentiment, buoyed by more competitive mortgage rates and expectations of lower interest rates.
"This is an exciting opportunity to bring together two highly complementary companies, creating an exceptional homebuilder in terms of quality, service and sustainability, able to build more of the high-quality homes this country needs," said Barratt CEO, David Thomas.
At 9.23 am, Redrow shares were changing hands for 673.5p, up 73.5p. Barratt's stock was off 38.9p, or 7% at 491.1p.