In-play housebuilder Bovis Homes PLC (LON:BVS) has named Greg Fitzgerald, a former boss of Galliford Try plc (LON:GFRD) as its new chief executive, at the same time as rejecting a merger proposal from its smaller rival.
Fitzgerald will take over as Bovis boss with effect from April 18 2017, when interim CEO Earl Sibley will resume his role as the FTSE 250-listed’s group finance director.
Sibley took over in January after David Ritchie quit as Bovis’s chief executive a week after the group cautioned that new house sales this year will be lower than expected due to completions in December falling short.
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Commenting on current trading in today’s statement, Bovis said: “Current sales and reservations are in line with the Board's expectations and we are making good progress with our priorities for 2017.”
The group also said it intends to return to shareholders any excess capital which results from a balance sheet optimisation programme over the next two years and from improved cash generation from operations.
Fitzgerald is the former chief executive and chairman of Galliford, where he spent over 30 years of his career.
The new Bovis boss will get an annual salary of £650,000, plus an annual bonus of up to 100% of salary payable in shares and deferred for 3 years
Commenting on his appointment, Fitzgerald said: "Bovis has a great brand, excellent people and a high quality land bank. I very much look forward to working with the management team to restore Bovis' position as a leading housebuilder and deliver significantly improved returns to shareholders."
Ian Tyler, Bovis non-executive chairman, added: "We are delighted that Greg has agreed to be our new Chief Executive. He brings a wealth of housebuilding experience and I am confident he will rapidly drive performance across the Bovis business."
In late afternoon trading, Bovis shares had extended their earlier gains to over 4%, up 35.0p to 881.5p, helped by an upgrade in rating from Liberum Capital to 'buy' from 'hold' with an increased target price of 940p, up from 911p.
In a note to clients, Liberum's analysts said: “The surprising announcement of Greg Fitzgerald as new CEO means that the Group now has a CEO with a track record good enough to suggest that there is every chance that he can bring Bovis' returns into line with the sector.”
They added: “More meaningful performance will need evidence of delivery, which we believe will be achieved, but not without hiccups. Not our preferred stock in the sector by any means, but today's CEO appointment is genuinely a ‘game changer’.”
Merger withdrawn …
The appointment came as Bovis noted an announcement this morning by Galliford withdrawing its merger proposal.
Bovis said that, in recent weeks, it has held discussions with Galliford to assess the merits of its merger proposal, focusing on the potential synergies that might result from a combination of the businesses.
Following these discussions, the housebuilder said Galliford re-affirmed the terms of its merger proposal and the level of synergies expected to arise from the combination.
Having reviewed the merger terms, however, Bovis’s board concluded that it failed to reflect the underlying value of the business and has rejected the proposal.
The group said “it believes that an independent strategy under the leadership of Greg Fitzgerald will deliver greater value for shareholders.”
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Bovis revealed on March 19 that it had rejected takeover offers from both Galliford and Redrow plc (LON:RDW), although it said that talks with Galliford were continuing.
Galliford had proposed an all-share merger offer at a 7% premium to Bovis’ share price at the close on the previous Friday, around 886p per share.
Redrow approached Bovis on 27 February with a proposed share and cash deal, worth the equivalent of 814p per share.
In its statement today, Galliford said that although discussions with Bovis over a number of weeks “have been largely constructive”, it had become clear to that it was not possible to secure the support of the Bovis board to a merger “on terms that represent the best interests of Galliford Try shareholders.”
The group added that that it “believes that Galliford Try has a strong future based on its current business model.”
Galliford Try shares added 0.7%, or 10p at 1,472p.
-- Adds shares prices, broker comment --