Taylor Woodrow Share Discussion Threads

[judge jury] 28/3/2007 11:42

Most of the "TWOD takeover premium" seems to have disappeared today. TWOD and WMPY trading pretty much in line with the merger ratio.

[judge jury] 27/3/2007 20:36

Here's a simplistic post merger valuation. I have literally done it on a piece of paper in 5 mins so if there are errors, I apologise.

Assuming the merger goes ahead on the current terms, there will be 1,141m shares in issue, with TWOD shareholders keeping hold of the 582m shares they currently have and WMPY shareholders swapping their shares for 559m new TWOD shares.

I am not sure what the current forecasts are for the two groups, but the combined PBT for 2006 was £777m (source: 2.5 announcement). Let's assume they both grow their PBT by 10% this year and lets assume the £70m of synergies are achieved this year. This would mean the proforma PBT for 2007 is about £925m.

Assume a 30% tax rate, and we get to PAT of some £650m. Apply a sensible PE rating (lets say 9.5x earnings), and we get to a market value of £5.9bn. Given that there will be 1,141m shares in issue, this would imply a post merger share price of around 540p.

Persimmon would have to pay about 700p to disrupt the deal in my view ... tough call, but they are tough Yorkshiremen after all

[8gamsby] 27/3/2007 20:03

how will the share price be decided at the end of thr merger.wmpy shareholders wont be very happy will they.Ithink they should have offered a special divi.Still i do think that PSN will have a go.NOT yet for me a done deal

[judge jury] 27/3/2007 16:39

A bit of a bid premium seems to have kicked in today. With TWOD at 480p, I would expect WMPY to be trading at 657p if the merger ratio was working properly. However, it's at 644p, probably reflecting a small risk (at this stage) of PSN bidding for TWOD and destroying the merger (WMPY would fall back significantly). Worth monitoring whether the price differential closes (implying lower risk of intervention) or increases (implying higher risk of intervention).

[judge jury] 27/3/2007 11:26

Interesting, Fitch has upgraded Taylor Woodrow's outlook to positive on the proposed Wimpey merger. Presumably, this would reverse if Persimmon announced a debt-funded cash bid.

[judge jury] 27/3/2007 09:38

Whatever the outcome of this situation, I do think the merger parties have been pretty badly advised. The parallels with the Domus merger are there for all to see - two of the largest UK housebuildings which have underperformed their peers agree to combine to create a giant, but on relatively unattractive terms for shareholders (nil premium merger). The deal is particularly unattractive for Beazer/Wimpey shareholders but they only agreed to this because Bryant/TWOD is a potential target. If the deal is blown apart (when someone makes an offer for Bryant/TWOD) then Beazer/Wimpey are sitting ducks.

All of this trouble could have been avoided if the merger parties had thought more of their shareholders and offered a big cash return - £1bn to both TWOD and WMPY shareholders would have been eye catching.

Presumably, these type of conversations took place between the respective advisers and executives. Looks like the advisers werent very convincing. I bet they are worried now.

[judge jury] 27/3/2007 09:21

Also, I think it might be the case that TWOD is the Offeror in the merger and hence they are under no obligation (under the City Code) to reveal any information to any potential bidders. Of course, PSN could put pressure on TWOD's shareholders to open their books - but this would be ultra aggressive

[judge jury] 27/3/2007 09:11

Just doing some quick sums to see how realistic a PSN bid for TWOD might be.

TWOD's net assets per share at 31/12/06 was 364.7p. Any bid wont close until about the mid-year, so net assets per share at this point will be somewhere close to 400p.

From memory, BDEV paid about 1.8x net assets for WLB and PSN paid about 1.45x net assets for WBY. I can't see TWOD recommending any bid for less than the WLB multiples, so lets assume PSN will have to pay 1.8x net assets. That would mean they would have to pay about 720p per share, or about £4.2bn.

I dont think PSN could afford a £4.2bn all cash bid. However, they could probably afford something like a 50:50 cash: share bid.

However, PSN faces some quite big risks. For one, they know nothing about the US and it will take them a lot of time to get up to speed on all of TWOD's markets over there. OK, they may want to spin it off, but they would have to buy TWOD assuming they would take it on (they are very unlikely to find a buyer of these assets within the bid timetable).

I also wonder whether the competition people might want to take a quick look at a PSN bid.

Then there are the normal acquisition/due diligence risks (although PSN are quite good at buying companies).

When it comes down to it, I just think PSN wont want to pay close to £2bn in goodwill. It would be betting the firm and risking all the good work that it has done thus far for a business that may not be that good. Quite simply, this is a deal they dont need to do.

I hope I am proved wrong though.

[judge jury] 27/3/2007 08:13

Any intervention seems to be media speculation at this stage, and doesnt seem to have much substance. But who knows?

Perfect marriage could be demolished
Tom Griggs analyses the 'made in heaven' merger of George Wimpey and Taylor Woodrow, which a rival may yet pull apart.
By TOBY SHELLEY
27 March 2007
Financial Times

Peter Redfern, chief executive of George Wimpey, says his company's merger with Taylor Woodrow is a "marriage made in heaven".

In fact, it was hatched "in a grubby little service station on the M40", according to Ian Smith, his counterpart at Taylor Woodrow.

That has not made the deal, announced yesterday, any less appealing to investors.

"The nil-premium merger proposed between Taylor Woodrow and Wimpey is particularly attractive in terms of combining Wimpey's build cost efficiency with Taylor Woodrow's land bank in the UK, strategic in particular," says Kate Moy an analyst at Teather & Greenwood.

Wimpey and Taylor Woodrow have underperformed their sector with operating margins of 13 per cent at both groups, compared with more than 20 per cent at Persimmon and 16 per cent at Barratt.

Mr Smith - who only joined Taylor Woodrow in January after running General Healthcare and being short-listed to run the NHS - seems to have wasted no time in addressing this shortcoming.

He, however, is leaving. The task of making the deal work will fall to Mr Redfern, who, at 36, will be almost the youngest chief executive in the FTSE 100 when the enlarged company, Taylor Wimpey, joins the index.

Mr Redfern only took charge in July, having run Wimpey's UK operations and lifted margins there to 17 per cent, although these fell back again in 2006.

He believes that, by bringing the two companies together, he can make them more profitable by cutting Pounds 70m of costs and improving their purchasing power with suppliers of building materials.

The deal is the fourth this year among the large housebuilders.

Over the past decade, the sector has shrunk from 32 companies to 10 as the complexity of the planning system and shortage of usable land has encouraged builders to become bigger.

Merging, analysts say, has enabled companies to cut costs, but it has also given them much-needed flexibility, balance sheet strength and bargaining power against suppliers.

For those reason, few analysts or investors expect yesterday's deal to be the last. Shares in Redrow, Bovis Homes and Bellway shot up by 4.5 to 7.5 per cent yesterday on speculation that they would be soon be swallowed up.

Many, however, believe that the next target could be the deal announced yesterday. In particular, speculation that Persimmon would bid for Taylor Woodrow drove its shares up 13 per cent yesterday - much more than the 3 per cent gain enjoyed by Wimpey.

Nil-premium mergers of equals in this sector have failed before, as when Beazer and Bryant attempted to combine in 2001. Beazer ended up being bought by Persimmon and Bryant by Taylor Woodrow.

Persimmon said last month it had completed the integration of Westbury, the company it acquired more than a year ago.

Since then, Persimmon has paid down debt and appears ready to take on another acquisition, although it would not comment on this yesterday.

Analysts say Persimmon would be more likely to have a go at Taylor Woodrow than Wimpey because of its superior land bank and because a combination with the larger Wimpey could arouse the interest of the Competition Commission in some parts of the UK.

According to Chris Millington, an analyst at Bridgewell, a bid by Persimmon for Taylor Woodrow would be earnings-enhancing at current market rates, even assuming that the US, Spanish and construction businesses were sold off without a premium.

However, any attempt by Persimmon to sell off US assets could result in a significant tax hit under FIRPTA (foreign investment in retail property tax act). Tax experts said this could be significant but was unlikely to be a deal-breaker.

Ms Moy, of Teather & Greenwood, thinks Persimmon is unlikely to pursue its alternative options - a bid for one of Redrow, Bovis or Bellway - because of their high valuations and the additional premiums all three companies would attract because of their strong land banks.

The other potential spoiler for Wimpey and Taylor Woodrow's deal is private equity. Sir Tom Hunter and HBOS are the obvious candidates after their acquisitions in the past 12 months of McCarthy & Stone and Crest Nicholson.

The fact that, even after these deals, they were able to attempt a Pounds 2bn-plus bid for Wilson Bowden, albeit unsuccessfully, suggests they would not be put off by either Taylor Woodrow or Wimpey's size.

Mr Millington, of Bridgewell, believes the managements of Wimpey and Taylor Woodrow may be holding something back in case of a counter-bid from Persimmon or private equity.

"I would be very surprised if there was no speculation," he says. "There is scope for a more leveraged balance sheet and I'm sure the boards will have spoken about the possibility of a cash payment or restructured dividend."

Additional reporting by Toby Shelley

[judge jury] 27/3/2007 08:09

Rivals may gatecrash £5bn deal conceived on M40
By Saeed Shah
27 March 2007
The Independent

Is an interloper going to break up the "match made in heaven", the merger of housebuilders Taylor Woodrow and George Wimpey?

The deal, which was first whispered between the chief executives of the two companies in January at a greasy spoon cafe on the M40, is all-shares and nil-premium. Announced yesterday, the transaction creates the UK's biggest house-builder but the proposed tie-up is vulnerable to another party coming in with a competing cash offer.

Persimmon, currently the most valuable builder on the London stock exchange, is considered the most likely of the trade players to intervene, while private equity could also pounce. Chris Milligan, an analyst at Bridgewell Securities, said: "This is a very sensible deal, but it has not closed the option for other people to have a look... With a nil-premium merger, the two companies have, effectively, put themselves in play."

Mr Milligan suggested that the boards of Taylor Woodrow and Wimpey ought to have offered shareholders a return of cash, to make the deal more attractive – this ploy could still surface if a counterbid emerges.

The precedent on every-one's mind was the nil-premium merger announced with great fanfare back in 1999 between Beazer and Bryant. Soon afterwards, Taylor Woodrow muscled in for Bryant, while Persimmon walked off with Beazer.

As it stands, the creation of Taylor Wimpey brings together two relatively lowly rated builders, both with significant businesses in the US which have been hit by the collapse of the market there. It offers cost-savings worth £70m a year, including job losses put at under 700. But the two companies made it clear yesterday that the rationale for the transaction was strategic, rather than one predicated on synergies.

Ian Smith, chief executive of Taylor Woodrow, who only joined in January, said frankly: "We have an underperforming UK business, with margins at the lower reaches of the industry and some investor impatience with performance."

Mr Smith will be left without a job under the deal, with the chief executive role for the combined business going to his opposite number at Wimpey, Peter Red-fern. Mr Smith can expect a £1m pay-off, though – not bad for a few weeks' work. It was newness of Mr Smith's role that made the future management of the combined group easy to agree as he could be easily dispensed with. The chairman will come from the Taylor Woodrow side, in the shape of Norman Askew, as will the finance director, Peter Johnson.

Taylor Woodrow shareholders will hold 51 per cent of the combined business. The new company will have revenues of £6.7bn a year and produce some 22,000 UK house sales a year and about 9,000 in the US. That compares with 16,700 completed sales at Persimmon last year, while the recently announced takeover of Wilson Bowden by Barratt will produce 19,800 completions a year.

The combined stock market value of Taylor Woodrow and Wimpey, of over £5bn, will propel the new company into the FTSE 100 index, alongside the highly-regarded Persimmon. Both Taylor Woodrow and Wimpey have profit margins of 13 per cent, which is way below the 20 per cent-plus that the best operators in the sector enjoy. Mr Redfern said that two drivers for margin improvement would be better land-buying and reduced building costs.

"Together it is a significantly better business than either company on their own.

We both had improvement plans. We can now get those plans to move more quickly," Mr Redfern said.

In the UK, Taylor Woodrow has the better land-bank – that is the number and location of plots for future development. Conversely, Wimpey does better on the cost front, with its build costs standing at 51.4 per cent of revenue, compared with 55.5 per cent at Taylor Woodrow. The logic is that Taylor Wimpey will be able to apply Wimpey's better cost discipline to the superior land-bank held by Taylor Woodrow. Combined, they can buy bigger sites and hold on them for longer before developing.

Geographically, Taylor Woodrow did not have the UK well covered, so rather than start offices in new regions, this deal does that job for it. Another area for improvement is the sales behaviour at the individual sites. Mr Smith explained: "Both companies have issues with the business model. The sales rate is too fast at our outlets."

The problem is both companies suffer from sales targets that encourage heavy discounting and the offer of incentives to buyers. These are meant to drive volumes, which they do, but at the expense of profit margins. Particularly towards the end of each calendar year, in the pre-Christmas period, the sites race to meet their annual targets, which usually involves offering consumers a cheaper deal.

This uneven sales record ought to be "smoothed" by the merger, as the greater balance sheet of the new company will not be so reliant on sales volumes.

One obvious business activity that separates Taylor Woodrow and Wimpey from their London-listed rivals is their US divisions. These American businesses had been riding the boom in the US housing market but, over the last year, they have had to contend with a sharp correction. The two businesses have overlapping locations in the growth markets of Arizona, Florida, California and Texas, together with Taylor Wood-row's business in Canada. North America will account for about 37 per cent of the combined group's operating profit.

Kate Moy, an analyst at Teather & Greenwood, said: "There is tremendous opportunity for growth here [in the US], notwithstanding current market conditions. Putting the two businesses together brings them closer to critical mass with greater firepower to compete with the larger US incumbents." In the markets in individual US states, the separate companies are often 10th or 12th largest players. Together, they ought to be top five, while they aim, in time, to be top three.

Mr Smith said the enhanced balance sheet of the new company would provide "the debt capacity needed to invest behind recovery in North America".

The companies said the US had stopped deteriorating and they foresee a recovery making itself felt either in the second half of this year or early in 2008.

In the UK, Mr Redfern insisted conditions remained favourable, despite interest rate rises and fears over affordability. "What we are seeing in the UK is pretty robust, we are not seeing a great deal of nervousness," Mr Redfern said.

The housebuilding sector has been in sporadic consolidation mode since that Beazer-Bryant deal was announced in 1999. In 2005 Persimmon bought West-bury, while in the last few months, Wilson Bowden, McCarthy & Stone and Crest Nicholson have all been taken out – interestingly the last two by private equity. Taylor Woodrow and Wimpey offer a private equity player conservative gearing, a good asset base, pretty of room for operational improvement and a ready-made divestment in the shape of the US business.

The merger does make plenty of sense. Combined, Wimpey and Taylor Woodrow shareholders will certainly do better than under the stand-alone businesses. Do they would probably do better still, though, with a cash counter-bid.

Mr Smith described the deal yesterday as a "marriage made in heaven". But either company could be snapped up before they reach the altar.

[judge jury] 27/3/2007 08:06

I still think a PSN bid is unlikely. Happy to be proved wrong

Persimmon may scupper Wimpey deal
By Philip Aldrick
27 March 2007
The Daily Telegraph

PERSIMMON is expected to gatecrash the proposed pounds 5.4bn merger between housebuilders Taylor Woodrow and George Wimpey.

Bankers believe the acquisitive group could scupper the deal with an offer for Taylor Woodrow. ''Even if they are not fully convinced about the merits of a bid, they will want to look at the books,'' said a banker close to the deal.

Taylor Woodrow is obliged to open its books to any serious bidder after yesterday's proposed nil-premium, all-share merger with Wimpey. Industry insiders believe the two companies have left the door open to rival bidders after failing to give shareholders a cash sweetener.

Bridgewell analyst Chris Millington said: "I believe shareholders will be asking why they have chosen not to return any cash. It gives Persimmon ammunition to come up with an alternative.''

Persimmon added to the speculation by dismissing its long-term media advisers, Finsbury, who are acting for Taylor Woodrow. Observers said chief executive John White had decided on the move because he wanted to keep his options open and avoid any conflict of interest. Persimmon declined to comment, but its shares jumped 37p to pounds 14.37.

Mr Millington said Taylor Woodrow was a far more likely bid target than George Wimpey due to its lower housing completion rate. Taylor Woodrow built 8,294 homes in the UK last year and George Wimpey 13,616. Persimmon, which built 17,000, could have competition issues if its completion rate exceeds 30,000.

Taylor Woodrow shares leaped 54½ to 475p, valuing it at pounds 2.76bn, and Wimpey's rose 18 to 653p, capitalising it at pounds 2.62bn. Taylor Woodrow shareholders will own 51pc of the combined entity and Wimpey shareholders 49pc. Together, they will create the UK's largest housebuilder.

Mr Millington said the combined group had headroom to return about pounds 500m to shareholders. The merged entity, to be known as Taylor Wimpey, will be geared at a comparatively low 25pc. It expects to wring out savings of pounds 70m a year for a one-off cost of pounds 60m, predominantly by reducing the 14,000-strong workforce by around 700.

Wimpey chief executive Peter Redfern indicated that there was no cash return because he needs to bolster the land bank, which will stand at just three years' supply for land with planning permission. He said: "The nil-premium merger is very important. There will be opportunities to buy land. The great attraction here is no cash changes hands and we keep our debt capacity.''

He added that the cash would be used to "keep the UK business going and especially to invest behind the recovery in North America''.

The merged group expects sales in the UK to fall by around 5pc after the merger as it starts managing its land bank for profits not sales. Mr Redfern said: "This is about how you sell at each region rather than running the regions harder and harder.''

He predicted that the combined group would improve its profit margins of 13pc, the worst in the industry, to 18pc.

[judge jury] 26/3/2007 17:25

Also interesting

FOCUS Taylor Wimpey deal could be vulnerable to a raid from Persimmon
26 March 2007
AFX International Focus

LONDON (AFX) - Today's merger between Taylor Woodrow PLC and George Wimpey PLC will not have caused many analysts to choke on their cornflakes when it was unveiled this morning. A union between two sector underperformers with identical US and UK profiles had long been mooted to try and bump up their flagging 13 pct margins.

What they were left pondering instead as they filed out of today's meeting at JP Morgan's Moorgate offices was whether the companies had left themselves open to a higher bid from an aggressive acquisitor- such as Persimmon PLC, currently the UK's top housebuilder by volume but likely to sink to third in the pecking order if the Wimpey/Taylor Woodrow and Barratt PLC/Wilson Bowden PLC deals go through.

The issue will be whether the merging companies' shareholders feel they are getting enough attention from the two boards. Today's deal does not require either company to splash out huge amounts of cash, and given that it should be earnings enhancing and there are potentially huge synergies, some analysts expected a cash-return sweetener to shareholders to get them on side.

'What I found interesting from the meeting was the pressure the management were getting by people saying, 'you're not taking it far enough',' one analyst said. 'In a deal where you're going to have a balance sheet which is 20 pct geared you're not pushing it too hard.'

Taylor Woodrow chief executive Ian Smith and Wimpey boss Peter Redfern said today they would look for 'at least 70 mln stg' in synergies from the deal. This has also been seen as quite timid, with analysts thinking well over 100 mln stg is more than possible.

'You put it all together and think -- it's conservatively geared, getting an uplift in earnings and its going to throw off cash,' the analyst said. 'But does that leave it open for someone to come in and be a bit more aggressive on these things?'

Teather & Greenwood's Kate Moy agreed, noting that 'putting two underperforming businesses together does not necessarily create a good business'.

'Will Persimmon come in and upset the party?' she asked. 'We believe the US business would not be attractive to Persimmon and Taylor Woodrow would be preferred to Wimpey.'

Taylor Wimpey, as the merged firm would be known, will decrease its sales by 5 pct if the deal goes through. This move, done because housebuilders chasing volume often have to offer discounts to homebuyers to shift the product, should improve margins.

'By virtue of these guys taking the foot off the pedal on the sales rate they should be able to be more selective in the deals they do, and so the margin should improve,' one analyst said.

However, this will mean that the new company's replacement land spend will not be as high as it would be otherwise, which should mean they have more cash. If Persimmon then announces it could gear up the company more highly and return some of this cash to shareholders, then Taylor Wimpey might have to rethink its strategy.

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[judge jury] 26/3/2007 17:22

I agree with much of this, but do think that the deal will be a good one in the long term

THE SKEPTIC: Builders' Wimpey Offer
26 March 2007
Dow Jones International News
By Arindam Nag
A DOW JONES NEWSWIRES COLUMN

LONDON (Dow Jones)--Another day, yet another record deal in the U.K. building sector. But not everyone is likely to be happy with the marriage between George Wimpey and Taylor Woodrow.

The deal will create a stronger group with more land and buildings under construction, and a stronger balance sheet that could be used for more deals, especially in the fragmented U.S. market.

But investors in Wimpey are being offered just 49% of the enlarged group, despite having the higher market cap of the two. And they aren't being offered any premium to come to the altar.

Surely Wimpey's investors deserve better.

The merger will generate savings of GBP70 million, the two companies say. At just 1.4% of the combined market cap, this looks low given the wide overlap in operations - both in the U.K. and in the U.S.

Wimpey is in the middle of an efficiency exercise of its own that will generate savings of GBP25 million.

To put the conservative synergy target into perspective, Persimmon Group, the largest U.K. builder, paid only GBP646 million for Westbury, which is nearly a quarter of Wimpey's size but has already achieved GBP32 million of synergies in 2006 and is targeting another GBP45 million in 2007.

Without any premium, Wimpey is being valued at 1.5X book value. That compares with the 1.8X Barratt paid for Wilson Bowden and the 2.5X HBOS offered for McCarthy & Stone.

The merging groups argue that this deal is about future growth from a stronger platform. That's partly justified given the two companies' recent poor track records. After all, Taylor Woodrow and Wimpey's Ebitda margins - at 13.1% and 11.5% respectively - are lower than the 17.4% peer median.

The combination can leverage on the enlarged landbank strength of 92,000 plots, which is equivalent to more than four years' supply. That's also more than the roughly 80,000 plots that Persimmon owns.

But still, given that investors in both companies had to live recently with below-par returns, offering a simultaneous special dividend would have been justified, since there are no immediate benefits to be had by approving the deal.

The combined group's balance sheet could easily support such a dividend. Its combined net debt/equity will stand at 20.4%, less than Persimmon's 33%. Even if the group returned GBP350 million by borrowings - at an interest expense of less than GBP25 million - its leverage would remain competitive.

The companies have indicated that they want to preserve the financial muscle to do regional deals in the U.S. But this may not be wise immediately, given the current volatility in builders' earnings there.

Indeed, arbitrage traders have boosted share prices of both companies Monday. But for the value investors who have stuck around, some cash would have been more appropriate.

(Arindam Nag has covered business and finance for 15 years in Asia, Europe and the United States. He can be reached at [phone] or by e-mail: [e-mail]) [ 26-03-07 1426GMT ]

[judge jury] 26/3/2007 17:15

On reflection, I think the 1.4% discount may relate to the WMPY options (7.3m outstanding at the end of 2006). That would mean WMPY has 408.6m shares on a fully diluted basis (rather than the 401.0m shares on a non-diluted basis). I am sure someone cleverer than me has thought more about this.

[judge jury] 26/3/2007 16:55

I think it is interesting to note that the 51:49 merger ratio doesn't seem to have kicked in quite yet.

TWOD seems to have closed today at 475p. However, this includes the final dividend of 9.75p, so the ex-dividend price is 465.25p.

If the merger ratio was working, WMPY should have closed at a cum-dividend price of 661.84p (ex-dividend price of 648.74p plus the final dividend of 13.1p.

However, WMPY seems to have closed at 653p, a 1.4% discount to the implied merger ratio.

I dont know whether this is significant at all and it will be worth monitoring in the next few sessions. 1.4% doesnt seem too great and it is possible that I have missed something to do with shares under option. Conceivably, however, it may imply that there is a risk that the merger will not complete (e.g. PSN bids for TWOD, hence the slightly premium, and WMPY is left at the altar, hence the discount).

I may be reading too much into this. However, I do think that the lack of any cash return as part of the deal was somewhat disappointing and perhaps opens the door to a PSN bid if they were thus inclined. And it's more likely that they will bid for TWOD than WMPY in my view (lots of land, not being used properly - similar to Beazer, ironically).

[ttg100] 26/3/2007 14:00

ok many tks
am also looking at OKD
only a little un but easily absorbed

[judge jury] 26/3/2007 13:40

Any of Bovis, Bellway and Redrow ... but they are all expensive already (compared to history at least) and I dont see PSN paying a premium for these companies. Obviously, BDEV wont be in acquisition mode for a while as they digest Wilson Bowden.

More likely, Bovis and Redrow will merge. Indeed, this could happen quite quickly as they may make use of the fact that BDEV, TWOD and WMPY have their hands full and take the risk that PSN wont overpay and hence wont intervene.

Taylor Wimpey will be concentrating on building up their presence in the US. They spoke today about making small bolt on acquisitions in the US, although I would like to see them taking out one of the big boys over there. This would give them a very strong platform and would make Taylor Wimpey a very attractive investment vehicle. My favourite would be KB Home, where there is strong overlap in the South of the country ... and they also have a French subsidiary, which would open the continent up for Taylor Wimpey as a new market.

[judge jury] 25/3/2007 14:36

More than a little I would suggest. The cost savings are likely to be something like £50-100m pa - worth some £500m-1,000m in value terms (split 50:50).

There may also be a sizeable return of cash to both shareholders as part of the deal to sweeten it for shareholders - perhaps of the order of £250m-£500m each.

Also, the deal catapults Taylor Wimpey into the FTSE100, so there should be substantial buying from funds once the deal completes (and hence ahead of the deal completing as entry is anticipated).

Also, both trade at a substantial discount to the sector in general and PSN in particular and I would expect this discount to narrow (even though PSN is still the quality player and a discount will still be warranted for a while).

Taylor Wimpey may also be able to sell the fact that it has more attractive long term growth prospects than PSN or BDEV since the deal will create an excellent platform in the US (still a long term growth market despite the current problems). PSN and BDEV may have one more acquisition in them from a regulatory point of view but competition concerns will start to mount after that and they will be limited to organic growth (even though there is probably plenty of that left for a while yet.)

[hotstuff] 25/3/2007 14:24

I would therefore expect both shares to rise a little on Monday.

[spob] 25/3/2007 09:12

From The Sunday Times

March 25, 2007

Builders in £5bn merger talks

Jenny Davey and Matthew Goodman

GEORGE WIMPEY and Taylor Woodrow are in advanced merger talks to create a £5 billion transatlantic housebuilding giant. The deal will be confirmed to the London Stock Exchange tomorrow and will cap an extraordinary wave of takeover and merger deals in the housing sector in the past 12 months.

Wimpey and Taylor Woodrow, both valued at £2.5 billion, are in detailed discussions about an all-share deal that will propel the new company into the FTSE 100. Peter Redfern, Wimpey's chief executive, is expected to assume control and Norman Askew, chairman of Taylor Woodrow, is tipped to become chairman of the merged business. Final details of the deal are being hammered out this weekend.

Ian Smith, who recently joined Taylor Woodrow as chief executive from General Healthcare, is expected to leave the business with a handsome pay-off.

Taylor Woodrow and Wimpey are expected to generate big cost savings by combining their American and UK housing divisions and stripping out duplicate overheads.

The company will have a workforce of almost 14,000. Analysts expect at least 10% of the staff to be made redundant. Wimpey has a network of 26 regional businesses and it is thought that a number of offices could be closed down.

The combination will create a company that will build more than 30,000 homes a year with sales of £6.8 billion. Last year Wimpey completed 17,963 homes, of which 13,616 were in Britain and 4,347 in the United States. Taylor Woodrow built 13,165 homes last year, of which 8,294 were in the UK, 4,492 in North America and 379 in Spain and Gibraltar.

Industry experts said there was a chance that Persimmon could try to bust open the talks with a cash bid for Taylor Woodrow. Persimmon, chaired by John White, is back on the prowl for acquisitions after reducing its debt following its takeover last year of smaller rival Westbury. The firm reported profits of £566m last year and as a sign of confidence lifted its dividend by 72%. It also surprised analysts by saying it had achieved savings of £45m from its acquisition of Westbury.

Housebuilders have seen huge benefits from merging operations and pooling landbanks. Earlier this year Barratt agreed to buy Wilson Bowden, a deal that when completed will create a £4.9 billion business.

Wimpey is being advised by JP Morgan Cazenove and UBS is advising Taylor Woodrow. The two housebuilders have been affected by the slowdown in the American housing market and this is believed to be one of the main reasons why they entered into the merger negotiations. In January Taylor Woodrow announced a £40m writedown in the value of its American landbank.

It is thought that big shareholders in both companies have been sounded out about a merger. The pace of takeover activity in the sector has been unprecedented.

The Scottish entrepreneur Sir Tom Hunter recently bought Crest Nicholson with HBOS, the bank. Other deals include buyouts at McCarthy & Stone, the retirement-home specialist, and Countryside Properties. It is thought Wimpey has also looked closely at buying Redrow, which is worth almost £1 billion, but the proposal was shelved.

Not all builders have succumbed to mergers and acquisitions fever. Berkeley, the group run by Tony Pidgley, was at one time in talks to be taken private by Guy Hands, the private-equity entrepreneur. The talks broke down and Pidgley used the opportunity to push through an innovative, private-equity style way of realising value. This has enriched both the directors and investors.

The firm is now expected to accelerate its plan to return £1.45 billion, equivalent to £12 a share, to investors. It is thought the group will ask permission at its annual meeting in June to return the next £2 a share instalment of the capital return this summer - it had been due in January 2009. The final £3 instalment, due in January 2011, is likely to be paid by the start of 2009.

Analysts say that builders have been big beneficiaries of a benign economy, high employment and low interest rates.

[ttg100] 01/3/2007 11:10

dumped em this am for -17
will keep on radar and rebuy
if indices look better.

[ttg100] 27/2/2007 12:18

again 417.90
enuff 4 a while