By Aby Jose Koilparambil
(Reuters) -British homebuilder Bellway has unexpectedly dropped its 720 million pound ($921 million) bid to buy smaller peer Crest Nicholson, sending Crest’s shares almost 20% lower on Tuesday.
Bellway declined to give a reason for its decision.
Shares in Crest, which had rallied after the takeover talks were revealed in June, dropped 19% to a near three-month low of 213.80 pence, erasing all those gains. Bellway was up about 4%.
Crest had said last month it was ready to recommend Bellway’s latest 273-pence-per share proposal if the suitor made a formal offer. The deadline for Bellway to make a firm offer had been extended by 12 days to Aug. 20.
Hargreaves Lansdown analyst Susannah Streeter said talks had clearly raised some concerns whether the tie-up would justify the 720 million pound price tag.
“Bellway remains confident that its robust balance sheet and operational strength, combined with the depth and quality of its land bank, will enable Bellway to deliver volume growth in the years ahead,” it said in a statement.
In a separate statement, Crest said it remained “confident in its standalone prospects”.
Crest was also approached by smaller rival Avant Homes about a merger proposal, but it declined to enter talks as it was in negotiations with Bellway.
“There is a glimmer of hope Avant Homes may come through with another offer,” said Streeter.
Avant Homes, which is backed by activist investor Elliott, declined to comment.
Bellway’s latest proposal was made in July and was the third in four months. A previous proposal of 253 pence per share and an initial bid were rejected by Crest.
Britain’s homebuilding sector has been consolidating as a shortage of properties drives up purchase prices and rents, prompting the new Labour government to pledge to ease planning restrictions and encourage more building.
Last week, Bellway joined larger rivals in sounding upbeat about the sector’s prospects after the Bank of England cut its main interest rate.
($1 = 0.7820 pounds)
(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Vijay Kishore and Mark Potter)
