U.K.-based Bovis Homes Group PLC has re-engaged in initial talks regarding a potential merger with Galliford Try PLC's Linden Homes and Partnerships & Regeneration divisions in a deal that is expected to value the businesses at approximately £1.08 billion.
The companies noted that they have agreed to "high-level terms" under which the potential deal would be implemented, but "significant work" still needs to be completed before entering into a definitive deal.
Following the deal completion, Galliford Try would continue as a U.K.-listed construction-focused group fully owned by its shareholders.
Under the terms of the potential deal, Galliford Try shareholders will receive 0.57406 Bovis share for each Galliford Try share, translating to 63,739,385 Bovis shares valued at £675 million. Bovis will also pay £300 million in cash to Galliford Try and assume the latter's 10-year debt private placement of £100 million.
Galliford Try will also transfer its pension schemes to Bovis on terms acceptable to the Galliford Try pension schemes' trustees and Bovis.
Bovis will fund the cash consideration of £300 million through an equity placement by way of an accelerated bookbuild for cash of 9.99% of its existing share capital and by raising additional debt and using its existing balance sheet resources.
Bovis will return £60 million of capital to its shareholders, expected to be paid in 2019, by way of a bonus issue settled at deal closing through the issuance of fully paid Bovis shares. Bovis also expects that its 2019 final dividend will be replaced by a second interim dividend that will be paid in cash to the company's shareholders only.
Following the deal completion, and taking into account the issue of new Bovis shares and the bonus issue, Galliford Try shareholders would own about 29.3% of the enlarged Bovis entity.
The deal is expected to provide Bovis with a platform to compete in a more effective manner in the U.K. homebuilding market, among other benefits.
The potential transaction is subject to a vote by the respective shareholders of the companies.
Lazard & Co. Ltd. is joint financial adviser to Bovis, along with Numis Securities Ltd., which is also serving as the sole book runner and sole broker. Powerscourt is the PR adviser to Bovis.
Rothschild & Co. is the lead financial adviser to Galliford Try, HSBC Bank PLC and Peel Hunt LLP are its joint financial advisers and corporate brokers, and Tulchan Communications is its PR adviser.
