Barratt £2.5bn takeover of fellow housebuilder Redrow gets approval from competition authority

The deal will create by far the UK's largest housebuilder but had been blocked over competition concerns

Newcastle-founded housebuilder Barratt's £2.5bn purchase of Redrow has been given the go-ahead after regulators accepted the companies’ measures designed to assuage competition concerns.

The Competition and Markets Authority had raised concerns that the deal could lead to higher prices and lower quality homes in one area – in and around Whitchurch, in Shropshire, where Redrow has a plot with planning consent for 324 homes. Despite the CMA raising concerns, Barratt, already the country's largest housebuilder had pushed on with the deal anyway.

Barratt said in August that it would waive conditions put on the deal by the regulator and took ownership of Redrow’s shares. But the companies have so far been made to continue operating independently until competition questions were settled.

The two companies put forward measures including appointing property agents from Savills as a third party to sell the houses. They also said they would ensure the homes are “constructed to Redrow’s quality standards and for construction to be completed in a timely manner”.

Joel Bamford, executive director for mergers at the CMA, wrote on Friday that measures put forward by the companies represented “as comprehensive a solution as is reasonable and practicable”. He added that they “remedy, mitigate or prevent the SLC (significant lessening of competition) identified… and any adverse effects resulting from it”.

The two firms are expecting to have fully merged within 18 months of the acquisition, with efficiencies and cost savings due to take shape after three years. The tie-up is expected to lead to cost savings of at least £90m a year, with a one-off cost of making these savings of about £73m.

This is expected to partly be achieved by a restructuring of staff and offices as they cut overlapping roles, which could lead to the loss of about 10% of jobs across the combined business.

Barratt chief executive David Thomas said: “With this combination, we have created an exceptional housebuilder in terms of quality, service and sustainability, able to accelerate the delivery of the homes this country needs. Together, we offer a broader range of homes and price points for our customers who we will continue to put at the heart of everything we do.

“Our focus now is on integrating our businesses as efficiently and effectively as we can to deliver the expected benefits of the Combination. We will leverage the best of both companies to deliver significant benefits to our people, our customers and our supply chain partners, and ensuring that Barratt Redrow is set up to deliver long term value to all of its stakeholders.”