Galliford said in a statement it had rejected a preliminary offer from Bovis for its Linden Homes and Partnerships & Regeneration division on the grounds that it does not fully value the businesses. The offer would have seen Galliford shareholders receiving Bovis Homes shares for a total consideration of £950 million and £100 million of Galliford’s debt.
Shares in Galliford rose more than 5% to 561p after the annoucement.
Galliford Try is unusual in that it is not a pure listed housebuilder like Persimmon (PSN) or Taylor Wimpey (TW.). It also works on civil construction projects such as airports, prisons and office buildings.
Bovis’s offer would have been for the housebuilding division rather than the entirety of Galliford Try.
Bovis confirmed that the talks had broken down and that the two parties are no longer in discussion. In 2017, the scenario was reversed: Galliford Try failed in its attempt to buy Bovis Homes, which at the time was seen as a laggard in the sector.
The housebuilding sector has been under pressure this year as the property market has slowed and shareholders have voiced concerns over executive pay at Persimmon.
In February’s annual results, Bovis’s pre-tax profit was up nearly 50% to £168 million, a new record, and the board recommended a 20% increase in the total dividend payout for the year to 57p per share. The yield is now more than 5%, compared with nearly 12% for Persimmon.
The strong financial results could not escape the slowdown in the UK housing market, however: Bovis sold 3,759 homes in 2018 – just 114 than in the previous year – and the average selling price is just 0.3% higher year-on-year.
Bovis’s shares fell in the equity market sell-off at the end of 2018 but have recovered to nearly £10 in the last few months. The share price was largely unchanged this morning.
Galliford Try is held by a range of active and passive funds. Two-star and Neutral-rated Jupiter Distribution and Growth Fund has almost 1.5% of its assets in Galliford. Three-star rated Premier Ethical Fund has a similar weighting. With Galliford shares yielding more than 14%, it is represented in a number of dividend ETFs and closed-end funds focused on income such as Henderson High Income Trust (HHI), which has a three-star rating from Morningstar.
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